Goldman Sachs expects home values to worsen in 2023 amid rising interest rates and falling home prices.
The company wrote to clients earlier this month that it predicts four US cities will suffer the most, comparing it to the 2008 housing crash.
San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Arizona, will likely see a significant increase before a significant decrease of more than 25%.
These declines will be similar to those witnessed during the Great Recession of 2008. Home prices across the US fell about 27% during that period, according to the S&P CoreLogic Case-Shiller index.
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“Our revised forecast for 2023 reflects our view that interest rates will remain at higher levels for longer than current rates, with 10-year Treasury yields peaking in 2023 Q3,” Goldman Sachs strategists wrote, according to the New York Post. “As a result, we are raising our forecast for the 30-year fixed interest rate to 6.5% at the end of 2023 (representing an increase of 30 bp from our previous expectation).”
By 2022, mortgage rates jump from 3% to 6%.
“This thing [national] The decline should be small enough to prevent widespread credit stress, and a sharp increase in foreclosures across the country seems unlikely,” Goldman Sachs wrote. , the Phoenix MSA, and the San Diego MSA will have to contend with a peak decline of more than 25%, revealing the risk Home of high delinquency loans started in 2022 or late 2021.
The bank says these cities will experience the lowest rates this year because they have largely diverged from fundamentals during the COVID-19 pandemic.
Goldman Sachs also predicted that most of the Northeast, Southeast, and Midwestern markets could see weak corrections.
Home prices are expected to dip slightly in New York City (-0.3%) and Chicago (-1.8%), while Baltimore (+0.5%) and Miami (+0.8%) will see higher prices, the company said.
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“We think that if the economy remains on a soft path, barring a recession, and the 30-year mortgage rate returns to 6.15% by the end of 2024, home price growth will shift from moderate to moderate. In 2024, said Goldman Sachs.
The average 30-year fixed mortgage rate was at 7.37% at its peak in November.