Goldman Sachs expects home values to deteriorate through 2023 amid continued rising interest rates and falling home prices.
The company wrote to clients earlier this month that it predicted four US cities would experience the most catastrophic declines, comparing them to the 2008 housing crash.
San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Arizona, are likely to see notable increases before a drastic reduction of more than 25%.
These declines would be similar to those seen during the Great Recession of 2008. Home prices across the U.S. fell about 27% during that time, according to the S&P CoreLogic Case-Shiller index.
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“Our revised 2023 forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently estimated, with 10-year Treasury yields peaking in the third quarter of 2023,” Goldman Sachs strategists wrote , according to the New York Post. “As a result, we are raising our forecast for the 30-year fixed mortgage to 6.5% for the end of 2023 (a 30bp increase from our previous expectation).”
In 2022, mortgage rates jumped from 3% to 6%.
“This [national] the decline should be small enough to avoid major mortgage stress, with a sharp increase in foreclosures across the country unlikely,” Goldman Sachs wrote. values of over 25%, which represents a localized risk of higher defaults for mortgages originated in 2022 or at the end of 2021.
The bank says these cities will suffer the lowest prices this year because they have become too disconnected from the fundamentals during the COVID-19 housing boom pandemic.
Goldman Sachs also predicts that many markets in the Northeast, Southeast and Midwest could experience milder corrections.
A slight drop in house prices is expected in New York (-0.3%) and Chicago (-1.8%), while prices will be higher in Baltimore (+0.5%) and Miami (+0.8%), she announced. is a company.
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“Assuming the economy remains on a soft landing path, avoiding a recession, and the 30-year fixed mortgage rate falls to 6.15% by the end of 2024, home price growth is likely to shift from below-trend depreciation to appreciation in 2024.” “, wrote Goldman Sachs.
The average 30-year fixed mortgage rate was 7.37% at its peak in November.