Ara Hovnanian, Chairman and CEO of Hovnanian Enterprises, discusses the state of home builders and whether the housing market has bottomed in The Claman Countdown.
Goldman Sachs expects property values to deteriorate into 2023 amid continued skyrocketing interest rates and falling home prices.
The company wrote to clients earlier this month that four US cities will suffer the most catastrophic burglaries, drawing comparisons to the 2008 housing crash.
San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Arizona, is likely to see a notable rise before a drastic fall of more than 25%.
These declines would be similar to those seen during the Great Recession of 2008. According to the S&P CoreLogic Case-Shiller Index, U.S. home prices fell about 27% at the time.
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Goldman Sachs expects property values to deteriorate into 2023 amid continued skyrocketing interest rates and falling home prices. (Portal photos)
“Our revised 2023 guidance primarily reflects our view that interest rates will remain elevated for longer than currently priced in, with 10-year Treasury yields peaking in the third quarter of 2023,” wrote Goldman’s strategists Sachs, according to the New York Post. “As a result, we are raising our forecast for the 30-year fixed-rate mortgage rate to 6.5% for year-end 2023 (an increase of 30 basis points from our previous expectation).”
In 2022, mortgage rates went from 3% to 6%.
“This [national] The decline should be small enough to avoid a broader mortgage lending strain, with a sharp rise in foreclosures across the country looking unlikely,” wrote Goldman Sachs , Phoenix MSA and San Diego MSA are likely with peak-to-trough declines of over 25 % are struggling, presenting a localized risk of higher arrears on mortgages incurred in 2022 or late 2021.
San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Ariz. (pictured) are likely to see a noticeable rise before a drastic decline of more than 25%. (iStock / iStock)
The bank says these cities will suffer the lowest prices this year because they strayed too far from fundamentals during the COVID-19 pandemic housing boom.
Goldman Sachs also forecasts that many markets in the Northeast, Southeast and Midwest could experience milder corrections.
Home prices are expected to fall slightly in New York City (-0.3%) and Chicago (-1.8%), while Baltimore (+0.5%) and Miami (+0.8%) higher prices will be seen, the company said.
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Home prices in New York City and Chicago are expected to fall slightly, while Baltimore and Miami (pictured) will see higher prices. (iStock / iStock)
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“Assuming the economy stays on track for a soft landing, avoids a recession, and the 30-year fixed-rate mortgage rate falls back to 6.15% by the end of 2024, home price growth is likely to shift from devaluation to devaluation below-trend appreciation postponed to 2024,” Goldman Sachs wrote.
The average interest rate for 30-year fixed-rate mortgages was 7.37% in November.