Goldman Sachs stated that although US housing prices are already difficult to afford, it is not expected that US housing prices will decline soon.
In its latest forecast, the bank said that without unexpected economic turmoil, average housing prices would rise by 1.8% year-on-year in 2023 and another 3.5% by the end of 2024.
The team of Lofti Karou, chief credit strategist at Goldman Sachs, wrote in a research report: "The affordability of new buyers is even worse than during the peak housing prices before the 2008 crisis
If there is no negative impact on the overall economy, leading to an oversupply of housing or an increase in unemployment in the market, we continue to expect housing prices to rise at a slow pace, "they added.
Although housing prices in the United States are currently more affordable than before the 2008 financial crisis, Karoui's team predicts that the limited supply of new homes and many borrowers being "locked in" at lower mortgage rates rather than being traded, resulting in limited overall housing supply in the market, which will continue to drive up housing prices.
According to estimates from the National Association of Realtors (NAR) and the Biden administration, the decline in inventory levels has squeezed the real estate market in recent years, with a housing gap of between 1.5 million and 5.5 million units in the United States. The latest data shows that the NAR index, which tracks the affordability of housing in the United States, fell to record lows in June and July.
Meanwhile, since March 2022, the Federal Reserve has been significantly raising interest rates to curb inflation, which has led to higher borrowing costs. According to Freddie Mac, the average interest rate on 30 year fixed rate mortgages has surged from 3.8% to 7.6% during the same period.
In addition, existing homeowners choose to maintain the historically low interest rates they have locked in over the past 15 years, rather than replacing or selling their properties. In the first half of 2023, only 1% of Americans sold their homes.
Goldman Sachs pointed out that one of the advantages of the current tight real estate market is that the real estate foam in 2008 will not repeat, when the house price once fell about 20% from the peak.
Looking back at the previous housing market crash, we compared the situation that led to a significant pullback in housing prices and found that the current market situation is much more stable, "they wrote in the report. Better credit standards and the disappearance of complex financial products such as subprime mortgage-backed securities will be factors that will prevent another major crash.