The US housing market has been slowing over the past few months as interest rates continue to rise.
But Goldman Sachs has warned potential home sellers that the downturn in the housing market will worsen in 2023. And for interested home buyers, that doesn’t necessarily mean lower home prices.
“We expect home price growth to stall completely, averaging 0% in 2023,” Goldman strategist and economist Jan Hatzius said in a note to clients. “While outright declines in national house prices are possible and appear highly likely for some regions, large declines appear unlikely.”
House prices averaged $525,000 in the second quarter. By comparison, the average in the second quarter of last year was $473,000, and the average in 2020 was $374,500.
Although strategists are predicting a slight decline in home prices over the next year, prices are expected to remain high due to inflation and limited housing inventory.
“High mortgage rates and low affordability are not the only barriers to housing,” the memo adds. “Available home sales and building permits have fallen more sharply this year in areas that saw the biggest increases earlier in the pandemic, suggesting that recent declines also reflect a partial pullback in pandemic-related housing demand.”
The average 30-year fixed mortgage rate rose to 5.66% for the first time in the week ending in September. 1, a significant jump from a year ago when interest rates were 2.88%, according to data from mortgage lender Freddie Mac.
In summary, taking all factors into account, Goldman predicts a 22% decline in new home sales, a 17% decline in existing home sales and an 8.9% drop in total housing GDP before the end of the year.
Goldman predicts these numbers will further decline in 2023, with housing GDP falling 9.2% next year.
Despite projected declines in home sales, the Federal Reserve is doubling down on its intentions to cut interest rates. keep raising interest rates as inflation remains
“While higher interest rates, slower growth and softer labor market conditions will lower inflation, they will also cause some pain to households and businesses,” Fed Chairman Jerome Powell said in a speech last month. “These are failed costs to reduce inflation. However, failure to restore price stability would mean greater pain.”
Sentiment among homebuilders and builders fell to its lowest level in two years, according to the Census Bureau. Builders are putting the brakes on construction as construction costs continue to rise. Meanwhile, Americans cancels deals to buy a house At the highest rate since the start of the COVID pandemic.
Almost one in five home sellers lowered the asking price for their homes in August in an attempt to attract buyers.
