High mortgage rates are “killing the housing market” right now, and a Federal Reserve interest rate cut may be the “magic bullet” needed to push loan rates lower and jump-start home sales.

So declared Lawrence Yun, chief economist of the National Association of Realtors (NAR), during a Tuesday speech at the Realtors Legislative Meetings forum in Washington, D.C., according to a press release from the association.

Yun noted that inflation stood at 2.3% in April, which is slightly higher than the Fed’s preferred rate of 2%.

“We’re not there yet, but we’re very close,” Yun said regarding inflation. “The Fed will cut interest rates once inflation is fully under control.”

Yun forecasted that mortgage rates will average 6.4% in the second half of 2025 and 6.1% in 2026. Last week, the 30-year fixed-rate mortgage averaged 6.89%, according to Freddie Mac.

Though the NAR chief economist observed that the “fast ascent of mortgage rates has really hurt the real estate market,” he also detailed several reasons for optimism, including that shelter costs are trending downward from their recent cyclical peak. Shelter costs are housing-related expenses that include items such as rent, mortgage payments, utility costs and property taxes and insurance.

Yun also noted that wage growth is outpacing inflation and mortgage applications for new home purchases increased in April.

Yun thinks that new-home sales will increase by 10% in 2025 and will rise another 5% in 2026, with median home prices climbing 3% in 2025 and 4% next year. Additionally, he predicted that existing home sales will grow by 6% in 2025 and by 11% in 2026.

“There’s a light at the end of the tunnel based on recent rises in mortgage applications to buy a home,” Yun said. “Moreover, a solid majority of renters expressed desire to own a home.”