Goldman Sachs says 4 US cities will suffer a 2008 crash in home values (2024)

FAQs

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.

“That said, overheated housing markets in the Southwest and Pacific coast, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will likely grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages originated in 2022 or late 2021.”

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.

PHOENIX - Goldman Sachs says Phoenix is one of four cities that could see a housing crash to rival what we saw in 2008 – but a local expert says the numbers and trends don't add up. The investment bank is predicting drastic decreases in home prices – as much as 25%. Back in 2008, we saw drops up to 27%.

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 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%.

Nouriel Roubini recommends staying away from long duration bonds. Economist Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly" recession in the US and globally occurring at the end of 2022 that could last all of 2023 and a sharp correction in the S&P 500.

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.

The housing market in four major US cities could experience a drop of up to 25% in 2023, according to a recent prediction by Goldman Sachs – similar to what we saw in 2008. Goldman Sachs expects the housing market to drop up to 25% in these four major US cities: San Jose, California. Austin, Texas.

San Jose, California; Austin, Texas; Phoenix, Arizona; and San Diego, California, will likely see boom-and-bust declines of more than 25%. Such declines would rival those seen around 15 years ago during the Great Recession.

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.

On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States.

Arizona's Family got the report which forecasted 2023 and 2024 housing prices to fall the most in the West, where many mortgage payments claim half or more of a monthly income. Cities like Chicago and Philadelphia should see increases instead, although they're expected to be nominal when comparing income.

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.

Historically, home prices tend to rise over time, not fall. Prices are currently coming down in some markets, and the national median price was ever-so-slightly lower in February 2023 than it was in 2022, but experts do not expect dramatic drops.

Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.

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.

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.

Michael Burry rose to fame after he predicted the 2008 U.S. housing crash and managed to net $100 million in personal profits, and another $700 million for his investors with a few lucrative, out-of-consensus bets.

Who benefited from the 2008 housing crash? ›

Corporate America (especially banks), the super-rich and the index-investing concept benefited greatly from the financial crisis. Savers, low-skilled workers, troubled homeowners and stock exchanges fared the worst.

Roubini, Who Predicted the 2008 Financial Crisis, Sees 'Host of Mega-Threats' to Economy. The economist says we face some of the worst problems of the past, plus new ones to boot. Wake up and smell the coffee, says Nouriel Roubini, the chief economist of Atlas Capital who predicted the financial crisis of 2007-09.

The stock market crash of 2008 occurred on September 29, 2008. The Dow Jones Industrial Average fell by 777.68 points in intraday trading. Until the stock market crash of March 2020 at the start of the COVID-19 pandemic, it was the largest point drop in history.

The Bottom Line. Burry likely will be best known for being one of the few investors who predicted the subprime mortgage crisis that lasted from 2007 to 2010. He shorted the 2007 mortgage bond market by swapping CDOs and profited mightily from it.

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.

Kareem Serageldin (/ˈsɛrəɡɛldɪn/) (born in 1973) is a former executive at Credit Suisse. He is notable for being the only banker in the United States to be sentenced to jail time as a result of the financial crisis of 2007–2008, a conviction resulting from mismarking bond prices to hide losses.

We apply the highest ethical standards to our work. Our reputation, and the future of the firm, rely on our collective commitment to creating value and driving results honestly and with integrity.

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.

Instead of U.S. home prices falling 6.1% in 2023, which was their Jan. 10 prediction, researchers at the investment bank now expect national home prices to end 2023 down just 2.6%.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

Which cities were hit hardest by 2008 recession? ›

As a result, it clobbered high-tech hubs like San Francisco, Denver, Portland, San Jose, and Austin. But this recession again hit hard at manufacturing-dependent Rustbelt metros like Detroit and Cleveland and Sunbelt metros, whose economies were more exposed to the downturn in housing.

The study, released Thursday by Yale University political science professor Jacob Hacker and The Rockefeller Foundation, found that, from 2008 to 2010, Mississippi, Arkansas, Alabama, Florida and Georgia had the highest levels of insecurity.

The Midwest was likely affected more by job losses in industrial sectors, Frey said, while the Northeast was likely hit by a combination unemployment and housing foreclosures.

Another investment bank that participated in packaging toxic mortgage debt into securities, Goldman Sachs, led by Lloyd Blankfein, was allowed to convert to a banking holding company and received $10 billion in government funds, which it eventually repaid.

Our economists say there's a 25% chance of recession in the next 12 months, down from their earlier projection of 35% shortly following the failure of Silicon Valley Bank in March.

In the midst of this new environment, Goldman Sachs (GS) - Get Free Report projected that the odds of a US recession are now at 25%, a pullback from the investment bank's March prediction of 35%.

Goldman Sachs scored higher in 1 area: Career Opportunities. Citi scored higher in 6 areas: Culture & Values, Diversity and Inclusion, Work-life balance, CEO Approval, Recommend to a friend and Positive Business Outlook. Both tied in 3 areas: Overall Rating, Senior Management and Compensation & Benefits.

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.

Goldman Sachs pays a higher dividend yield than JP Morgan Chase. The Market Cap of JPM is over 3.5 times the size of GS. Both companies expect inflation to level in 2023 with less turbulent market activity.

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.

How long did it take for house prices to recover after 2008? ›

Delving Into 2008's Recession

Home prices fully recovered by late 2012. If someone bought a house at the very peak of the recession in 2007 and held the property for 5 years, they made money in appreciation after 2012. It took 3.5 years for the recovery to begin after the recession began.

U.S. homes lose $2 trillion in value during 2008 - Dec. 15, 2008.

While there's a lot of uncertainty in the real estate market and economy, many experts believe a housing market crash in 2023 is unlikely.

To compare other locations to the Scottsdale and U.S. housing market, enter a city, neighborhood, state, or zip code into the search bar. Scottsdale's median sale price is 103% higher than the national average. Overall cost of living in Scottsdale is 13% higher than the national average.

Arizona is not out of water, despite all those headlines you might read.

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.

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.

If a major downturn hits the U.S. economy, home prices in the New York City, Chicago and Philadelphia areas are the most vulnerable to declines, according to a new report from real-estate data company Attom Data Solutions.

The Midwest was likely affected more by job losses in industrial sectors, Frey said, while the Northeast was likely hit by a combination unemployment and housing foreclosures.

The housing market crash of 2008 remains one of the most significant events in the history of the United States housing market. It was caused by a combination of factors, including the subprime mortgage crisis, high levels of debt, and a lack of regulation in the financial sector.

What are the Goldman 4 cities? ›

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.

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.

Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.

There are several reasons to consider buying a home during recessions - the two main reasons are less competition and lower prices. There are also several potential drawbacks, like sky-high interest rates, a floor on pricing decreases and potential income changes if the U.S. does officially slide into a recession.

In this way, the effects of economic cycles tend to “spill over” from one metro to another. On the one hand, the study finds, Northeast and upper Midwest metros like New York, Chicago, Detroit, Baltimore, Pittsburgh, Columbus, Hartford, and Buffalo are weighed down economically by their adjacent metros.

Recessions and housing market crashes may cause your house's value to decrease. However, your set mortgage rates won't lower, meaning your monthly payments will be higher than your home's worth. While many may dip into their savings to help pay the steep bills, others may need outside assistance.

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.