Goldman Sachs Predicts Decline in Home Prices Due to Rising Mortgage Rates
Escalating Mortgage Rates and Shortage of Houses for Sale
Goldman Sachs has projected a decline in home prices due to escalating mortgage rates and a shortage of houses for sale. This combination of factors is expected to have a significant impact on affordability and discourage homeowners from selling their properties. As a result, home sales are predicted to drop to their lowest levels since the early ’90s. The bank anticipates around 3.8 million annual sales by 2024.
Effects on Affordability
Despite experiencing an initial increase of 4.2% in 2023, home prices are expected to decrease by 0.8% through December. This will result in a net year-over-year increase of 3.4%. As of September, the median home price was $412,000, which implies that a buyer with an 8% mortgage would need an income over $120,000 to afford the monthly payments.
High Mortgage Rates Discourage Movement
According to Mortgage News Daily, the average rate for a 30-year fixed-rate mortgage was 7.91%. This is substantially higher than the rates currently enjoyed by mortgage borrowers, with nearly all of them having rates below 7%, and over 60% having rates four percentage points lower. This significant difference is strongly discouraging current homeowners from selling and moving, thereby contributing to the predicted decline in home sales.
Winter Dip and Muted Growth
The bank also expects a temporary drop in home prices during the winter, followed by a rise in March 2024. Utilizing the Case-Shiller index, Goldman Sachs predicts that home prices will experience a brief dip in January and February 2024, followed by muted growth throughout the year.
Persistence of High Mortgage Rates
Furthermore, Goldman Sachs expects these high mortgage rates to persist, dipping to just under 7% by the end of next year. These elevated rates have led to mortgage applications hitting a 28-year low, reflecting the significant impact they have on the housing market.
This article provides valuable insights into Goldman Sachs’ projections regarding the future of home prices. Rising mortgage rates and a shortage of available houses for sale are expected to result in a decline in home sales and affordability. Homeowners are discouraged from selling due to the high mortgage rates, leading to a drop in home prices. Despite an initial increase in 2023, home prices are predicted to decrease by the end of the year. Additionally, the article highlights the persistently high mortgage rates and their impact on the housing market. These projections offer essential information for potential homebuyers, sellers, and industry professionals.
