Goldman Sachs sees decline in home values ​​in these 4 cities

As interest rates keep skyrocketingHome prices continue to decline nationwide – and Goldman Sachs says The decline will only get worse and will increase through 2023.

In a note to clients earlier this month, Goldman Sachs predicted that four US cities in particular should prepare for seismic downpours. 2008 housing crash,

San Jose, California; Austin, Texas; Phoenix, Arizona; And San Diego, California could see a boom and bust drop of over 25%.

Such a decline would almost rival the one seen during the Great Recession 15 years ago. According to the S&P CoreLogic Case-Shiller index, home prices across the United States have declined by about 27%.

“Our revised 2023 forecast primarily reflects our view that interest rates will remain higher in the third quarter of 2023 with 10-year Treasury yields higher than currently priced. As a result, we are increasing our forecast for the 30-year fixed mortgage rate for the end of year 2023 to 6.5% (representing a 30 bp increase from our prior expectation),” the strategists say.

Mortgage rates are set to rise 3% to 6% in 2022 – setting up the second significant home price correction since World War II.

Take a look at the study.
Take a look at the study.

“it [national] Should the decline be small enough to avoid widespread mortgage lending stress, a sharp increase in foreclosures across the country is unlikely. That said, peak-to-low declines of more than 25% are expected in hot housing markets in the Southwest and Pacific Coast, such as the San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA, which are local areas of high crime. introduces risk. for mortgages originating in late 2022 or 2021,” writes Goldman Sachs.

Goldman credits these cities as having the lowest prices in the coming year because they were so disconnected from fundamentals during the pandemic housing boom.

Meanwhile, Goldman predicts that many Northeast, Southeast and Midwest markets may see modest improvements.

Phoenix is ​​among the cities that can see a significant drop in home values.
Phoenix is ​​among the cities that can see a significant drop in home values.
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Austin, Texas
Austin is also projected to experience a sharp decline.
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San Diego
San Diego also made the bank’s list.
Getty Images/iStockphoto

In 2023, the investment bank expects Home prices have barely fallen in cities like New York (-0.3%) and Chicago (-1.8%), while predicting higher prices in Baltimore (+0.5%) and Miami (+0.8%).

“Assuming that the economy remains on a soft landing path, avoiding a recession, and 30-year fixed mortgage rate drops to 6.15% By the end of the year 2024, the growth in home prices will likely shift from depreciation to appreciation of the downward trend in 2024,” says Goldman Sachs.

Average 30-year fixed mortgage rate to peak in November sat at 7.37%.

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