Home prices could rise as much as 5% in coming years but don't expect a bigger jump, NAR chief economist says

• There's pent-up demand in the housing market that will help support home prices once mortgage rates decline again, NAR's chief economist said.
• For now, half the country is experiencing price declines and the other half increases, Lawrence Yun told CNBC.

There's pent-up demand building in the housing market that will help support home prices once mortgage rates decline again, National Association of Realtors Chief Economist Lawrence Yun said Monday.

For now, the national median price for existing homes was up 1% in January compared to a year ago, he said in a CNBC interview, though about half the country is experiencing price declines and the other half increases.

"Once the mortgage rate drops down a bit, one can again see the reopening of the gates for the homebuyers to re-enter," he said. "It's not going to be a frenzy condition. 20% price gains? No, it's not going to happen. But, say steady 3%, 4%, 5% annual gains — those are very plausible expectations in the upcoming years."

In October, the 30-year fixed rate reached 7% for the first time since 2002 as bond yields continued to march higher amid the Federal Reserve's aggressive rate-hiking cycle.

Mortgage rates fell back near 6% early this month, but have since rebounded sharply as hints of sticky inflation dashed hopes the Fed would ease up on policy. Mortgage rates are now sitting around 6.5%, on expectations the Fed will keep monetary policy tighter for longer.

But while another easing in rates will send home prices nationwide higher, some markets will see sharp declines. In some areas — such as Seattle and San Francisco — prices will drop by two-digit percentages by the end of 2024, according to a Goldman Sachs note last week.

Yun also noted that the housing shortage will not go away immediately, and more buyers will eventually enter the market.

"Is it a buyer's market, seller's market? Well, it's time for negotiation. I think people who are good at negotiation will get that right price they desire," he said.