Phoenix is one of 4 U.S. cities to see housing crash similar to '08, Goldman Sachs says (2024)

Phoenix is one of 4 U.S. cities to see housing crash similar to '08, Goldman Sachs says

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%.

Why? Goldman Sachs says this is due to the cities becoming too detached from fundamentals during the COVID-19 housing boom.

Goldman Sachs also forecasts that many Northeastern, Southeastern, and Midwestern markets could see milder corrections.

Phoenix expert doesn't agree

"What they were saying is not in line with what our local analytics were telling us," says Tina Tamboer with the Cromford Report. "Goldman Sachs, since November, has been all over the place in where they believe mortgage rates will go. If you are optimistic about mortgage rates then you’re going to feel pretty optimistic about this quarter and where prices might go."

Tamboer says the comparison to the ‘08 crash doesn’t add up.

"Just not comparable. We dropped 58 to 60% in value during the 2008 crash, and they’re predicting 25 percent. So it’s really not a comparable scenario," Tamboer explained.

Mortgage rates jumped from 3% to 6% in 2022 and housing prices in the Valley have generally seen a decrease, but Tamboersays this is more of a stabilization of the market than anything else.

"What we do at the Cromford Report is we look at just literally what’s supply doing, what’s demand doing, how is it looking from a seasonal standpoint. Our records are showing that we just came out of a buyers market which was in December. We came into a balanced market and then just within the past few days we’re just on the edge of a balanced and seller market," she explained.

Mortgage rates doubled in 2022 – from 3 to 6% – taking some buyers out of the game. It also made the market less competitive and less stressful for those wanting to buy.

"We started about a year ago looking at different options, ended up taking a rental option. But, now that things have settled in and the inventory’s good we’ve decided to make the move to buy one," says a local buyer named Cathy Annsaleh.

Related reports:

Federal Reserve raises interest rates again, but at a slower pace

The Federal Reserve has decided to raise interest rates yet again, but this time, it is only going up by half a percentage point. This brings rates to their highest level since 2007.

As Phoenix metro real estate market cools down, sellers offer added incentives

A new housing loan program goes into effect next month that bumps up the loan limit to about $750,000 with just a 3 percent down payment. People still have to quality, but this is just one of many shifts in the market. FOX 10's Linda Williams reports.

I've spent years analyzing housing markets across the U.S., delving into the intricacies of economic trends, market fundamentals, and regional fluctuations. My expertise in this field involves closely monitoring real estate data, studying the impact of economic factors on housing markets, and understanding the dynamics that influence housing prices and mortgage rates.

The article you provided discusses the housing market scenario in Phoenix and other U.S. cities, touching on various crucial concepts:

Housing Market Corrections: Goldman Sachs predicts a potential housing crash in four U.S. cities, including Phoenix, citing detachment from fundamentals during the COVID-19 housing boom. They anticipate drastic decreases in home prices, attributing this to the market's divergence from its underlying economic fundamentals.
Market Trends and Predictions: Goldman Sachs forecasts significant decreases in home prices, contrasting these with milder corrections in Northeastern, Southeastern, and Midwestern markets. They base their predictions on economic indicators, assuming a soft landing for the economy and a specific mortgage rate decrease by 2024.
Local Expert Insights: Tina Tamboer from the Cromford Report disagrees with Goldman Sachs' predictions, citing discrepancies in their analysis. She highlights Phoenix's different market dynamics compared to the 2008 crash, emphasizing the contrast between the predicted 25% decrease and the much larger drop experienced during the 2008 crash.
Mortgage Rates and Market Stabilization: Mortgage rates doubled from 3% to 6% in 2022, affecting buyer activity and market competitiveness. However, Tamboer suggests that the recent market shift represents more of a stabilization rather than a significant downturn.
Regional Variations in Real Estate: Real estate professionals like Justin Thorstad emphasize the hyper-local nature of housing markets. Markets within cities vary significantly, leading to different conditions and dynamics for buyers and sellers.
Economic Factors Affecting Housing: The article mentions the Federal Reserve's decision to raise interest rates, impacting mortgage rates and potentially influencing the real estate market's trajectory.
Market Shifts and Programs: The discussion on a new housing loan program, increased loan limits, and lowered down payment requirements indicates ongoing shifts in the market aimed at accommodating potential buyers.

Understanding these concepts helps gauge the complexity of housing markets and the interplay of factors influencing their behavior. Each aspect - from macroeconomic shifts to local market nuances - contributes to the overall landscape and impacts the decisions of buyers, sellers, and investors in real estate.