Market decline

US housing market decline will worsen in 2023: Goldman Sachs

The US housing market has slowed in recent months as interest rates continue to climb.

But Goldman Sachs has warned would-be home sellers that the housing market downturn is set to worsen in 2023. And for interested homebuyers, that doesn’t necessarily mean lower home prices.

“We expect house price growth to come to a complete halt, averaging 0% in 2023,” Goldman strategist and economist Jan Hatzius wrote in a note to clients. “While outright declines in domestic home prices are possible and seem quite likely for some regions, sharp declines seem unlikely.”

In the second quarter, home prices averaged $525,000. For comparison, the second quarter of last year averaged $473,000, and in 2020 the average was just $374,500.

Although strategists predict a slight decline in home prices over the next year, prices are expected to remain high due to inflation and a limited inventory of homes.

“Higher mortgage rates and reduced affordability aren’t the only housing drags,” the memo adds. “Existing home sales and building permits have fallen most sharply this year in regions where they rose the most at the start of the pandemic, suggesting that recent declines have also reflected the partial pullback from an increase in demand for housing linked to the pandemic.”

Average home prices in the United States from 2019 to 2022.
St. Louis Fed Economic Research Divisions

The average rate on a 30-year fixed mortgage jumped to 5.66% for the first time for the week ending September 1, according to data from mortgage lender Freddie Mac – a significant jump from a year ago. one year, when the rates were 2.88%.

In summary, considering all factors, Goldman forecasts a 22% drop in new home sales before the end of the year, a 17% drop in existing home sales and an 8.9% drop in overall GDP for the lodging.

Goldman expects those numbers to decline even further in 2023, with housing GDP falling 9.2% next year.

Looking to sell your home next year?  There is bad news about this.
Looking to sell your home next year? There is bad news about this.
Christopher Sadowski

Despite forecast declines in home sales, Federal Reserve doubles down on intention to keep raising interest rates as inflation holds steady

“While higher interest rates, slower growth and looser labor market conditions will bring inflation down, they will also hurt households and businesses,” the Fed Chairman said. Jerome Powell, in a speech last month. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.

Sentiment among builders and real estate developers plunged to its lowest level in two years, according to the Census Bureau. Builders are holding back construction as construction costs continue to rise. Meanwhile, Americans are rolling back deals to buy homes at the fastest pace since the COVID pandemic began.

Nearly one in five home sellers reduced the asking price for their home in August in a bid to attract buyers.