The housing market in the United States has been a rollercoaster ride in recent years, with unpredictable shifts that have left homeowners and buyers alike uncertain about what to expect. The latest forecast from Goldman Sachs is no exception, predicting a significant decline in home prices in some of the biggest cities in the country.
According to a recent note to clients, Goldman Sachs analysts predict that by the end of 2024, home prices will plunge by 19% in Austin, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle. The reason for this sharp decline in home prices is due to an oversupply of housing in these metropolitan areas, which has overwhelmed demand.
“While overall levels of housing inventory remain tighter than pre-pandemic levels, some vulnerable metropolitan areas have seen supply increase rapidly. Unsurprisingly, our home price appreciation forecasts have been most negative for geographies where supply is starting to overwhelm demand,” wrote Lotfi Karoui, Vinay Viswanathan, and Ronnie Walker, the authors of the note.
The report has sparked concern among homeowners in these areas, who are understandably worried about what the future holds for their investments. However, the analysts at Goldman Sachs emphasize that the anticipated decline in housing prices in these metropolitan areas is not reflective of a broader trend in the housing market.
In particular, the analysts note that San Francisco and Austin are home to major tech firms, including Amazon, Apple, Google, and Facebook, that has been at the forefront of industry-wide layoffs. The oversupply of housing in these areas is primarily due to local challenges, including poor levels of affordability, pandemic-related distortions, and a high concentration of employment in the technology industry.
The report from Goldman Sachs is not the first to predict a decline in the housing market. In an earlier note, the bank suggested that home prices nationwide could fall around 6% from their peak before bottoming out sometime in the next six months as a result of higher mortgage rates.
“The sharpest declines for the U.S. housing market are now behind us,” the strategists, led by Goldman chief economist Jan Hatzius, said in the January note.
The housing market has been sensitive to changes in interest rates, and the Federal Reserve's aggressive campaign to tighten policy and slow the economy has had a significant impact. Policymakers have already lifted the benchmark federal funds rate eight consecutive times and have signaled their intention to continue raising rates higher this year as they try to crush inflation that is still running abnormally high.
Mortgage rates have fallen from their peak of 7.08% in November but have recently reversed that trend and started to march higher amid interest rate-hike fears. The average rate for a 30-year fixed mortgage climbed to 6.65% this week, according to data from mortgage lender Freddie Mac.
That remains significantly higher than just one year ago when rates hovered around 3.76%. This rise in mortgage rates has contributed to the decline in the housing market, as it makes buying a home less affordable for many Americans.
Despite the concerns raised by the report from Goldman Sachs, other economists have predicted even steeper declines in the housing market. Ian Shepherdson, the chief economist at Pantheon Macroeconomics, warned that home prices could tumble as much as 20% from their peak.
It's clear that the housing market is in a state of flux, with many different factors contributing to the uncertainty. However, there are also some positive signs on the horizon that may help to stabilize the market in the coming years.
For example, the Biden administration has proposed a $15,000 tax credit for first-time homebuyers, which could make it easier for many Americans to afford a home. This proposal is part of a broader plan to tackle the affordable housing crisis in the United States, which has become a major issue in recent years.
In addition to the proposed tax credit, the administration has also unveiled plans to invest $318 billion in affordable housing over the next ten years. This investment will help to create new affordable housing units, rehabilitate existing units, and provide rental assistance to families in need.
These initiatives could help to boost demand for housing in some of the metropolitan areas that are currently oversupplied. However, it's important to note that the impact of these policies will take time to be felt in the housing market. In the short term, the market is likely to remain volatile, with unpredictable shifts in supply and demand.
Another factor that could impact the housing market in the coming years is the ongoing COVID-19 pandemic. The pandemic has had a major impact on the economy, with millions of Americans losing their jobs and struggling to make ends meet. Many homeowners have been forced to sell their homes or face foreclosure as a result.
However, the rollout of vaccines and the easing of restrictions in many parts of the country could help to boost the economy and stabilize the housing market. If the pandemic is brought under control and the economy begins to recover, we could see an increase in demand for housing in many parts of the country.
Ultimately, the housing market is a complex and constantly evolving ecosystem that is influenced by a wide range of factors. While the latest forecast from Goldman Sachs may be concerning for homeowners in some metropolitan areas, it's important to remember that this is just one prediction among many.
Other economists have predicted different outcomes for the housing market, and it's impossible to know for sure what the future holds. However, by staying informed about the latest trends and developments in the market, homeowners and buyers can make informed decisions about their investments and take steps to protect themselves against potential risks.
In conclusion, the housing market in the United States is currently in a state of flux, with unpredictable shifts in supply and demand. The latest forecast from Goldman Sachs predicts a significant decline in home prices in some of the biggest cities in the country, due to an oversupply of housing that has overwhelmed demand.
However, this is just one prediction among many, and it's important to consider a wide range of factors when assessing the state of the housing market. Initiatives like the proposed tax credit for first-time homebuyers and the investment in affordable housing could help to boost demand in some areas, while the ongoing COVID-19 pandemic could continue to impact the market in unpredictable ways.
By staying informed about the latest trends and developments in the market, homeowners and buyers can make informed decisions about their investments and take steps to protect themselves against potential risks.
More Insight on the Global & US Housing Market Forecast
According to Goldman Sachs Research, higher mortgage rates are causing housing markets around the world to slow down. After a surge in housing activity during the pandemic, home sales have pulled back sharply in the second half of 2022 due to the spike in mortgage rates enacted by central banks in most developed market economies. This contraction in housing starts, sales, and prices has persisted in 2023 and is expected to continue throughout the year.
The report suggests that the impact of higher borrowing costs for homebuyers has yet to be fully felt and that the global housing market may not have reached its bottom. The GS Research team estimates that each 100-basis-point rise in mortgage rates leads to a 6% decline in residential fixed investment after three or four quarters and a 2.5% drop in house prices after 10 quarters.
The timing of the impact varies across countries due to differences in mortgage markets. Countries with higher shares of fixed-rate mortgages tend to experience delayed rate impacts. Since mortgage rates have only recently peaked in most countries and could be headed higher still, the global housing market may not have found its bottom yet.
The report predicts significant peak-to-trough home price declines in developed markets where housing affordability plunged following the pandemic, including New Zealand (-19%), Canada (-19%), Sweden (-17%), and Australia (-15%). Developed markets that will likely see flat or moderate declines include Italy (-2% peak to trough), France (-4%), and Switzerland (-6%), reflecting a slower increase in mortgage rates and “less stretched” affordability.
The US housing market is expected to see “relatively tame” home price declines of around 5%, owing mainly to its extremely low vacancy rate.
Overall, the authors of the report believe that the housing declines around the globe are going “according to plan.” The strong housing market response to rate hikes has helped slow overall growth below trend without causing a recession or triggering a rise in delinquencies in most major economies. They anticipate that this pattern will continue.
| Country | Peak-to-Trough Home Price Decline |
|---|
| United States | -5% |
| New Zealand | -19% |
| Canada | -19% |
| Sweden | -17% |
| Australia | -15% |
| Switzerland | -6% |
| France | -4% |
| Italy | -2% |
References/Sources:
- https://www.goldmansachs.com/insights/pages/why-the-global-housing-market-has-further-to-slide.html
- https://www.foxbusiness.com/economy/home-prices-could-face-double-digit-drop-cities-goldman-sachs-warns
- https://news.yahoo.com/these-four-cities-could-see-double-digit-home-price-drops-goldman-sachs-204112309.html
FAQs
According to a recent note to clients, Goldman Sachs analysts predict that by the end of 2024, home prices will plunge by 19% in Austin, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle.
What is Goldman Sachs predicting for housing crash in 2023? ›
10 prediction, researchers at the investment bank now expect national home prices to end 2023 down just 2.6%. By the time U.S. home prices bottom out this summer, Goldman Sachs says, national home prices will be down around 6% from its June 2022 peak.
Is it better to buy when the housing market crashes? ›
Buying a property during a recession has advantages
Auctions may yield a reasonably priced house. To boost the economy, the Fed reduces interest rates during recessions. Banks decrease rates, including mortgage rates. Cheaper mortgage rates mean lower house costs over time.
What 4 cities will suffer a 2008 size crash in home values according to Goldman Sachs? ›
In an advisory to its clients this month, Goldman said home prices in San Jose, Austin, Phoenix and San Diego will experience boom-to-bust pendulum swings that will likely take prices down this year by more than 25% compared to 2022 peaks, the NY Post reported.
Is Goldman Sachs predicting a recession? ›
24, 2023. Goldman Sachs is forecasting an increased chance of a U.S. recession in the next 12 months, putting the odds at 35 percent following turmoil in the banking industry. The prediction by Goldman economists jumped by 10 percentage points after the historic fall of Silicon Valley Bank earlier this month.
What is Goldman Sachs 35 chance of recession? ›
Goldman Sachs dropped the odds of a recession occurring in the next 12 months by another 10% to only a 25% chance. The investment bank had previously said there was a 35% chance that a recession could occur.
Will 2023 be a bad time to buy a house? ›
Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.
Is the US headed for a housing crisis in 2023? ›
It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.
Will the housing market crash in 2023 or 2024? ›
Fannie Mae expects U.S. home prices to fall -1.2% between Q4 2022 and Q4 2023, and then another -2.2% between Q4 2023 and Q4 2024.
Does the housing market crash too if the stock market crashes? ›
There's no official correlation between stock market performance and housing prices. However, overall economic indicators that result from a stock market crash can often reverberate to the property market once stocks dip below 20%.
As prices become unsustainable and interest rates rise, purchasers withdraw. Borrowers are discouraged from taking out loans when interest rates rise. On the other side, house construction will be affected as well; costs will rise, and the market supply of housing will shrink as a result.
Will houses be cheaper if the economy crashes? ›
During a recession, there are usually less buyers, so houses stay on the market longer. This makes sellers more likely to lower their listing prices, so that their home is easier to sell. You might even get lucky with a home at an auction.
What are the 4 cities declining in Goldman? ›
In a recent note to clients, the strategists warned that by the end of 2024, home prices are set to plunge by 19% in Austin, 16% in Phoenix, 15% in San Francisco and 12% in Seattle. That's because those four cities have seen large increases in inventory, and supply is now overwhelming demand.
What 4 cities will have a big decline in Goldman Sachs? ›
By the fourth quarter of 2024, the firm expects home prices to fall 19% in Austin, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle.
Was Goldman Sachs responsible for the 2008 crash? ›
Role in the financial crisis of 2007–2008. Goldman Sachs has denied wrongdoing. It has stated that its customers were aware of its bets against the mortgage-related security products it was selling to them, and that it only used those bets to hedge against losses, and was simply a market maker.
Is 2023 a recession or soft landing? ›
Overall Outlook
In a best-case scenario, the U.S. will likely see a 'soft landing' with low/slow growth across 2023 before picking up in 2024. However, a downside scenario is a real possibility and could see the U.S. enter a prolonged recession lasting well into 2024, as is currently forecast for the UK and Germany.
How bad will be recession in 2023? ›
Fed seen lifting rates two more times before cutting in 2024. Inflation to keep decelerating this year as economy slows from high interest rates. Odds of a recession in 2023 hover at 64% amid bank failures and higher rates. Economists see jump in unemployment and major job losses over next 12 months.
How big will 2023 recession be? ›
Many economists believe the strategy will trigger a recession this year. But the NABE forecasters expect the economy to grow 0.8% in 2023 – based on the change in average GDP over the four quarters compared with 2022. That is down from 2.1% last year but up from their 0.5% estimate in December.
Who predicted 2023 recession? ›
Ans. The IMF's annual economic forecast, which was published in October, predicted sluggish global growth in 2023.
What is Goldman Sachs GDP forecast for 2023? ›
Goldman Sachs lowered its growth forecast by 0.3 percentage points to 1.2% for 2023, as gauged by the fourth quarter of 2022 to the fourth quarter of this year.
Stock Price Forecast
The 23 analysts offering 12-month price forecasts for Goldman Sachs Group Inc have a median target of 390.00, with a high estimate of 470.00 and a low estimate of 330.00. The median estimate represents a +23.26% increase from the last price of 316.40.
Will 2024 be a good time to buy a house? ›
With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.
Will mortgage rates go down in 2024? ›
Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.
Why buying real estate in 2023 could be a good idea? ›
2023 is a balanced year for housing supply and demand. This is ideal for retail purchasers and rental property investors. No longer a “seller's” market. Rising interest rates raise the monthly mortgage payment, which reduces homebuyers and lowers property values.
What happens to my mortgage if the housing market crashes? ›
What happens to my mortgage if the housing market crashes? A housing market crash won't affect your existing fixed-rate mortgage. However, if the value of your home drops below your purchase price, then you'll be making payments that are greater than the worth of your property.
What are the real estate challenges in 2023? ›
Top 10 Issues Affecting Real Estate 2022-2023
- Inflation and Interest Rates.
- Geopolitical Risk.
- Hybrid Work.
- Supply Chain Disruption.
- Energy.
- Labor Shortage Strain.
- The Great Housing Imbalance.
- Regulatory Uncertainty.
Yes—in two years' time. Both the housing market and millennial demand remain red hot, recent data from the Bank of America suggests. Sixty-seven percent (67%) of millennials said they are likely to purchase a property in the next two years, the 2022 Millennial Home Improvement Survey found.
Will 2026 be a good year to buy a house? ›
Housing Market Predictions 2026
A more conservative cohort predicts a more modest 10.3 percent growth in the same period. In addition, a mere 8 percent of poll participants expect the housing market to largely favor homebuyers in 2026.
What will the mortgage rate be in 2024? ›
Fannie Mae expects the 30-year fixed to ease to around 6.1% in the second quarter of 2023, before falling to 5.9% in the third quarter and 5.7% in Q4. And it gets even better than that. By the end of 2024, they expect the 30-year fixed to average 5.2%.
How much will my house be worth in 2030? ›
The state where house prices are predicted to be the highest by 2030 is California, where the average home could top $1 million if prices continue to grow at their current rate. Other states expected to see their average house price rise above the $750k mark include Hawaii, Washington and Colorado.
While a housing price correction is expected, we aren't in a housing bubble. Demand for homes remains high, and there are fewer home sellers than there were in 2022. And while the market is cooling, experts don't expect an actual housing crash or a housing bubble burst in 2023.
Will a recession cause the housing market to crash? ›
The short answer is: Absolutely not. Despite record-high inflation, real estate investors and homeowners should not be worried about it causing a drop in housing prices because real estate has always been the best hedge against inflation.
Will the housing market crash in 2024? ›
Despite the fact that there are some troubling trends in the housing market, we're likely not going to see a crash in 2023 or 2024. While house prices are likely to drop, demand for housing caused by America's ongoing housing shortage is likely to keep prices relatively stable.
What are 5 reasons the housing market is not about to crash? ›
When will the housing market crash? Actually, economists do not think it will. Housing economists point to five main reasons that the market will not crash anytime soon: low inventory, lack of new-construction housing, large amounts of new buyers, strict lending standards and a drop in foreclosures.
How much did house prices drop in the recession 2008? ›
The median price for a U.S. home sold during the fourth quarter of 2008 fell to $180,100, down from $205,700 during the last quarter of 2007. Prices fell by a record 9.5% in 2008, to $197,100, compared to $217,900 in 2007. In comparison, median home prices dipped a mere 1.6% between 2006 and 2007.
What happens when a housing bubble bursts? ›
The bursting of a housing bubble triggers a chain reaction: demand falls, prices fall, causing lower valuations, rapid sales or even foreclosures follow, causing prices to fall again.
Is it better to have cash or property in a recession? ›
In addition, during recessions, people with access to cash are in a better position to take advantage of investment opportunities that can significantly improve their finances long-term.
Do prices go down in a recession? ›
While the prices of individual items may behave unpredictably due to unexpected economic factors, it is true that a recession might cause the prices of some items to fall. Because a recession means people usually have less disposable income, the demand for many items decreases, causing them to get cheaper.
How far did house prices fall in 2008? ›
House prices fell by 15.9% in 2008, Nationwide said today - the biggest annual drop since the society began publishing its index in 1991.
Who is Goldman Sachs biggest rival? ›
Competitor comparison
- JPMorgan Chase & Co Headquarters. United States of America. No. of employees. 296,877. ...
- Bank of America Corp Headquarters. United States of America. No. of employees. 217,000. ...
- Citigroup Inc Headquarters. United States of America. No. of employees. 240,000. ...
- BNP Paribas SA Headquarters. France. No. of employees.
Key Takeaways. Goldman Sachs (GS) reported year-over-year declines in revenue and earnings per share. Losses in the consumer loan division and lower demand for investment banking dragged down the results. Management said that Goldman will scale back its consumer banking services.
What are Goldman Sachs weaknesses? ›
Weaknesses of Goldman Sachs
High Employee Turnover Rate – Goldman Sachs has a higher turnover rate compared to its competitors, which means more employees are leaving their jobs and, as a result, more money is spent on training and development when employees leave and join.
What 4 cities will suffer a 2008 crash in home values? ›
In an advisory to its clients this month, Goldman said home prices in San Jose, Austin, Phoenix and San Diego will experience boom-to-bust pendulum swings that will likely take prices down this year by more than 25% compared to 2022 peaks, the NY Post reported.
What cities did Goldman Sachs housing crash in? ›
The investment bank singled out San Jose, Austin, Phoenix and San Diego as the markets where home values could drop more than 25%. In the 2008 crash, average home values in the U.S. fell by 27%.
Did Warren Buffett save Goldman Sachs? ›
Investment of $5 billion to Goldman Sachs
In 2008, at the peak point of the global financial crisis, the legendary investor invested $5 billion in Goldman Sachs to strengthen the firm's capitalisation and liquidy in turbulent times. The then decision of Buffett has generated a return of roughly $3.1 billion for him.
Who profited the most from the 2008 crash? ›
John Paulson
The most lucrative bet against the housing bubble was made by Paulson. His hedge fund firm, Paulson & Co., made $20 billion on the trade between 2007 and 2009 driven by its bets against subprime mortgages through credit default swaps, according to The Wall Street Journal.
Who made the most money from 2008 market crash? ›
Subprime Mortgage Crisis
Sometimes referred to as the greatest trade in history, Paulson's firm made a fortune and he earned over $4 billion personally on this trade alone.
How much does Fannie Mae predict home prices will drop in 2023? ›
Fannie Mae expects U.S. home prices to fall -1.2% between Q4 2022 and Q4 2023, and then another -2.2% between Q4 2023 and Q4 2024.
Will home prices drop in Phoenix in 2023? ›
For example, the Phoenix metro area is projected to experience a 0.9% decline in housing prices by the end of February 2023, followed by a further 1.6% decline by the end of April 2023.
What is Goldman Sachs price prediction? ›
Stock Price Forecast
The 23 analysts offering 12-month price forecasts for Goldman Sachs Group Inc have a median target of 390.00, with a high estimate of 470.00 and a low estimate of 330.00. The median estimate represents a +17.54% increase from the last price of 331.80.
Goldman Sachs Research analysts expect global growth of just 1.8% in 2023, as US resilience contrasts with a European recession and a bumpy reopening in China.
Will mortgage rates go down in 2023 2024? ›
These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.
Will mortgage rates go down in 2023 or 2024? ›
Along those lines, organizations like Fannie Mae and the Mortgage Bankers Association forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.
What will mortgage rates be in fall 2023? ›
“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.
Will 2023 be a good time to buy a house? ›
Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.
Will my house be worth less in 2023? ›
Zillow still predicts that the vast majority of regional housing markets will see home values appreciating in 2023. Among the 897 regional housing markets Zillow economists analyzed, 853 markets are predicted to see rising house prices over the next twelve months ending with April 2024.
Is Goldman Sachs a buy now? ›
Is Goldman Sachs stock a Buy, Sell or Hold? Goldman Sachs stock has received a consensus rating of buy. The average rating score is and is based on 46 buy ratings, 21 hold ratings, and 2 sell ratings.
Is Goldman undervalued? ›
Further, at its current price of $320 per share, it is trading 17% below its fair value of $388 – Trefis' estimate for Goldman Sachs' valuation. The investment bank posted mixed results in the first quarter of 2023, with earnings beating the consensus but revenues missing the mark.
Is Goldman Sachs a safe investment? ›
How safe is Marcus By Goldman Sachs? Accounts held with Marcus by Goldman Sachs are FDIC-insured for up to $250,000 per depositor.
Why is Goldman Sachs dropping? ›
Goldman Sachs (GS) shares slipped close to 2% after reporting declining earnings stemming from losses in its consumer loans division as well as lower demand for investment banking. Goldman Sachs' revenue fell to $12.22 billion, down from $12.93 billion a year ago and lower than the projections of $12.8 billion.
