In line with Goldman Sachs analysts, 4 American cities that experienced a housing boom in the course of the COVID-19 pandemic will see significant declines in house prices by the top of next yr.
The pandemic cities of Austin, Seattle, Phoenix and San Francisco will see double-digit declines in prices as growth in available homes exceeds demand, bank analysts wrote in a note to customers last Thursday obtained by Insider.
The largest fall in house prices shall be in Austin, where values are projected to fall 19% by the top of 2024 in comparison with the top of 2022, in response to the memo. Prices are expected to fall 16% in Phoenix, 15% in San Francisco and 12% in Seattle.
“As an alternative of pointing to what’s going to occur nationwide, we view the emerging oversupply in the Pacific Coast and Southwest markets as a mirrored image of local challenges, notably very low levels of affordability, pandemic disruption and (in some markets) high concentration jobs in the tech industry,” Goldman Sachs analysts wrote in a note.
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As analysts have noted, Seattle and San Francisco are home to big tech firms – a lot of which, including giants like Amazon, Google and Twitter, have carried out layoffs in response to deteriorating economic conditions.
Nationally, house prices are expected to fall by 6.1% this yr because the housing market corrects, in response to Goldman.
In line with Freddie Mac, the once red-hot US housing market has struggled over the past yr during a surge in mortgage rates, which averaged around 6.5% last week.
Steep rates have pushed many potential homebuyers to the sidelines and compelled some landlords to lower asking prices to encourage demand.
Mortgage rates have fallen somewhat since they peaked above 7% last fall. Still, some recent worrisome inflation figures have exacerbated fears that the Federal Reserve will raise benchmark rates of interest higher than expected.
Overall, housing stocks proceed to be below normal levels – a trend that has kept prices from falling further.
“Even when every home under construction were immediately accomplished and put up on the market,” analysts said, “monthly home supply (the ratio of inventory to annual sales) would still be below historic averages.”
Earlier this yr, Goldman predicted that the decline in US home prices would likely end by the center of this yr – though the decline would proceed in overheated West Coast and Southwest Coast markets.
Sales of previously owned homes fell for the twelfth consecutive month in January, down 0.7% from December, in response to data released by the National Association of Realtors.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the decline in home sales is nearing the underside – however the fall in prices will proceed for a lot of months.
“Now that the downward adjustment in home sales in response to the initial rate increase is essentially complete, the massive story for 2023 shall be the speed and extent to which prices follow suit,” Shepherdson said in a note to clients.
Pantheon predicts that US home prices will fall by as much as 20% by the top of this yr.