The US housing market has fallen into it’s first recession in more than a decade and Goldman Sachs economists are now warning that investors should brace for the downturn to get worse in 2023.
“We expect home price growth to stall completely, averaging 0% in 2023,” the Goldman analyst, led by Jan Hatzius, said. “While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely.”
Even with home sales already declining, prices haven’t fallen much yet due to a limited supply and home builders being reluctant to build due to the current economic conditions.
“Higher mortgage rates and reduced affordability are not the only drag on housing,” Hatzius said in a note. “Existing home sales and building permits have fallen more sharply this year in regions where they increased the most in the earlier part of the pandemic, suggesting that the recent declines have also reflected the partial retreat of a pandemic-related boost to housing demand.”
Goldman is projecting a 22% decline in new home sales, a 17% decline in existing home sales and a 8.9% drop in housing GDP for 2022. They are also projecting things to get even worse in 2023 with a 9.2% decline in housing GDP by the end of 2023.
In August the Homebuilder index turned negative one month after a near record plunge. This index tracks how confident homebuilders are in being able to sell a house within six month. August marked eight months in a row that this index has seen a decline.
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