Analysts at Goldman Sachs warned in a note to clients on Tuesday that the US housing market is still “going down further.”
Analysts at the bank expect home price growth in the once-booming market to “slow sharply” over the next few quarters, with some markets falling. The slowdown has been attributed to lower demand from prospective homebuyers.
“We expect home price growth to completely stall, averaging 0% in 2023,” Goldman analysts said. While that looks very likely in the region, a significant decline is unlikely.”
Buyers face an affordability crisis as mortgage rates skyrocket and listing prices hit new highs during the pandemic-era boom. Falling demand has slowed the impact of the “extremely limited available supply” of housing, driving prices down, according to Goldman.
“Existing home sales and building permits have fallen more sharply in areas that saw the biggest gains early in the pandemic this year, and the recent decline is partly due to a receding in pandemic-related increase in demand for housing. It suggests that it reflects,” the memo said.
“Continued declines in affordability, waning tailwinds from the pandemic and recent declines in consumer confidence suggest further declines in net home sales are likely,” the analyst added. .
Bloomberg previously reported In a Goldman note.
Purchasing activity and prices soared during the COVID-19 pandemic as Americans were stuck at home for weeks at a time. But the housing market has softened significantly since the Federal Reserve began tightening monetary policy to combat inflation.
Mortgage rates hit 5.55% last week for 30-year contracts, nearly doubling since January as markets reacted to the Fed’s hawkish policy shift.
Fed Chairman Jerome Powell has suggested that the central bank will continue to raise rates in the coming months, which could result in “some pain” for American households and further boost mortgages.
“In a supply-constrained environment, we know that only a third of existing home sales are sensitive to changes in interest rates, but the upward trend in mortgage rates this year will ultimately We estimate that it will impact the level of home sales by almost 4%,” Goldman analysts said.
House prices are yet to experience a sustained annual decline at the national level, according to one measure. The price in June was 18% higher than in the same month a year ago, according to data from the S&P CoreLogic Case-Shiller Indices released on Tuesday.
Still, price growth has started to slow, rising 18% compared to May’s pace of 19.9%.
Studies based on month-over-month data are darker. another report Home prices fell 0.77% from June to July, according to mortgage analytics firm Black Knight.
Ian Shepardson, chief economist at Pantheon Macroeconomics, said prices had already started to fall, saying:not yet reached the bottom“
In recent weeks, more and more trade groups and companies have warned of troubling housing trends, declaring that the housing market is already in recession.
The CEO of real estate firm RedFin said earlier this week that cancellations of home sales have surged due to a “very uncertain time” for buyers.
Earlier this month, RedFin data showed that 21% of home sellers lowered their asking prices in July. The so-called pandemic “boomtown” such as Boise, Idaho.