For the first time in over a decade, residential real estate across the developed world looks vulnerable to price declines.that’s what happens When central banks switch to rate hike mode rear Unprecedented Rise in Home Prices.
Earlier this month, Goldman Sachs researchers released “The Housing Market Downturn: The North and the Bigger Deal in the North.” The paper predicts that by the end of 2023, house prices in New Zealand (-21%), Australia (-18%) and Canada (-13%) will experience a crash. For reference, in the US housing bubble, house prices fell 27% between his 2006 peak and his 2012 trough.
Goldman Sachs clearly has Australia, Canada and New Zealand in the camp of housing crashes (or near-crashes), but is less pessimistic about the rest of the G10. Goldman Sachs researchers predict that by the end of 2023 house prices will fall 6% in France and remain unchanged in the UK. Meanwhile, US house prices will actually rise by 1.8% in 2023, they say.
Why is Goldman Sachs much more bearish on countries like Australia and New Zealand than the US? It boils down to isolated fundamentals. While U.S. house prices have historically bubbled, prices in countries like Canada are simply off the charts. Canadian house prices soar 27% in the meantime U.S. Home Prices Rise Modestly at 18.9%.
A Goldman Sachs researcher said, “Across the G10, home sales are declining sharply, home price growth is slowing, and where prices have seen large gains during the pandemic, prices have fallen outright. There is
Nonetheless, researchers note that the housing market in some parts of the United States is highly likely to experience further declines in home prices. which market? Goldman Sachs did not disclose.However, the list probably contains Bubbly markets like Boise and Phoenix.
Another analysis by Moody’s Analytics forecasts that US house prices will remain stable or decline by as much as 5% from peak to trough.in the 187 local housing markets across the country are grossly ‘overvalued’Including Boise and Charlotte, Moody’s expects house prices to fall 5% to 10%. But that assumes there is no recession. In the event of a recession, Moody’s believes U.S. home prices will fall 5% to 10%, and significantly overvalued regional markets will fall 15% to 20%.
But just because groups like Goldman Sachs and Moody’s Analytics aren’t predicting a U.S. housing crash doesn’t mean the housing slump won’t undermine the overall U.S. economy. In fact, the economic contraction due to housing has already begun.
Last week, researchers goldman sachs expects US housing market activity to decline across the board in 2022 and 2023.The company expects sharp declines in the U.S. this year new home sale (down 22%), United States Sale of existing homes (down 17%), and the United States Residential GDP (down 8.9%). Goldman Sachs expects US new home sales (down another 8%), US existing home sales (down another 14%), and further declines in the US next year. Residential GDP (an additional 9.2% decrease).
economic contraction caused by Housing adjustments in progress Countries such as New Zealand, Australia and Canada can be even more serious.
“Based on this negative outlook for house prices and the importance of home investment and home wealth, the housing downturn poses significant downside risks to GDP in New Zealand, Australia and Canada,” Goldman Sachs researchers said. New Zealand is likely to plunge the country’s economy into recession due to a housing slump, according to investment banks.