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Goldman Sachs Predicts Major Housing Correction
Goldman Sach is the latest major investment bank to start calling the obvious, predictable, and, in many cases, needed correction in housing prices.
A 30% decline is driven by interest rates and simple math.
But this one is a bit more nuanced and fits in with our previous “radical prediction” for the housing market that’s a bit more contrarian at this point in the cycle.
Goldman is predicting mainly the hottest housing markets to turn cold.
The bank has singled out San Jose, Austin, Phoenix and San Diego as the markets where home values could drop by more than 25%.
This would be a significant drop on par with 2008 when the average home value in the U.S. fell by 27%.
The bank's revised forecast for 2023 is primarily based on their belief that interest rates will remain elevated for a longer period of time than previously thought.
It expects 10-year Treasury yields to continue to rise in the autumn of 2023.
The ongoing rise will keep rates for 30-year fixed mortgages at or above 6.5% for the rest of the year.
This prediction by the investment bank is a warning to homeowners in San Jose, Austin, Phoenix, and San Diego.
However, the bank's report also highlights the importance of considering the impact of interest rates on the housing market, which can have a significant effect on home values.
In conclusion, homeowners in these cities should be aware of the current economic climate and the potential for a decrease in the value of their homes.
It’s important for them to carefully consider the current market conditions before making any major decisions related to their homes.