The expected declines in these markets are not far from what occurred during the 2008 housing crash, when home prices in the U.S. fell by approximately 27%, according to the index.
The national decline, on the other hand, is expected to balance out the decline in these four markets — and is predicted to be enough to avoid mortgage credit stress and a sudden hike in foreclosures across the U.S.
According to Redfin, San Diego and Phoenix are among the most popular markets for seller concessions. These concessions include offering buyers money for home repairs and mortgage-rate buydowns as homeowners continue to sell homes for below the asking price.
Lotfi Karoui, Goldman Sachs’ chief credit strategist, fixed income strategist Vinay Viswanathan and economist Ronnie Walker told Business Insider that since home prices peaked in June 2022, “the total decline on a national basis will end up being about 10%” and that prices will grow again in 2024.
Mortgage rates will also stay higher for longer than investors expected.
“Our 2023 revised forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently priced in, with 10-year Treasury yields peaking in 2023 Q3,” company strategists wrote to clients. “As a result, we are raising our forecast for the 30-year fixed mortgage rate to 6.5% for year-end 2023 (representing a 30 bp increase from our prior expectation).”
This will worsen housing affordability, which has been dipping since the onset of the COVID-19 pandemic.
Among other predictions mentioned in the company’s note is an expectation of “milder corrections” in Northeastern, Southeastern and Midwestern markets to better meet supply and demand.
However, not all hope is lost.
“Assuming the economy remains on the path to a soft landing, avoiding a recession, and the 30-year fixed mortgage rate falls back to 6.15% by year-end 2024, home price growth will likely shift from depreciation to below-trend appreciation in 2024,” it added.
Although Goldman Sachs’ predictions are likely to concern real estate investors, a New Western report states that investors are confident going into 2023, despite the current housing market trends.
Source: housingwire.com