The US housing market has been slowing down in the past few months as interest rates have continued to rise.
But Goldman Sachs warned potential home sellers that the housing market downturn is expected to worsen in 2023. For interested homebuyers, this does not necessarily mean lower house prices.
“We expect house price growth to stop completely, averaging 0% in 2023,” Goldman strategist and economist Jan Hatzius wrote in a note to clients. “While outright declines in national home prices are possible and seem very likely in some areas, significant declines appear unlikely.”
In the second quarter, median home prices were $525,000. For comparison, last year’s Q2 average was $473,000, and in 2020, the median was just $374,500.
Although strategists are forecasting a slight decline in home prices over the next year, prices are expected to remain high due to inflation and limited home inventory.
“High mortgage rates and low affordability are not the only drawbacks to housing,” the note adds. “Existing home sales and building permits have fallen more sharply this year in areas where they increased the most in the earlier part of the pandemic, suggesting that recent declines have also reversed the partial decline in pandemic-related payment in housing demand.”
The average 30-year fixed-rate mortgage rose to 5.66% for the first time for the week ending September 1, according to data from mortgage lender Freddie Mac — a big jump from last year when rates were at 2.88%.
In sum, given all factors, Goldman expects new home sales to fall 22% before the year ends, existing home sales to fall 17% and 8.9% in GDP for housing.
Goldman expects those numbers to fall further in 2023, with a 9.2% drop in housing GDP next year.
Despite the expected declines in home sales, the Federal Reserve doubles its intention to do so Continue to raise interest rates With inflation continuing
“While higher interest rates, slower growth, and weak labor market conditions will lower inflation, they will also bring some pain to households and businesses,” Federal Reserve Chairman Jerome Powell said in a speech last month. These are the unfortunate costs of lowering inflation. But a failure to restore price stability would mean much greater pain.”
Morale of home builders and developers has fallen to its lowest level in two years, according to the Census Bureau. Builders are pressing the brakes on construction as construction costs continue to rise. Meanwhile, the Americans Cancellation of home purchase deals The highest rate since the start of the COVID pandemic.
Nearly one in five home sellers Lower the asking price to their homes in August in an attempt to attract buyers.