Goldman Sachs is predicting that home values will worsen through 2023 due to continued high interest rates.
They predict that San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Arizona will suffer the most drastic decreases, more than 25%, similar to size of declines during the 2008 housing crash. Home prices nationwide fell around 27% back then.
“Our 2023 revised forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently priced in, with 10-year Treasury yields peaking in 2023 Q3.” “As a result, we are raising our forecast for the 30-year fixed mortgage rate to 6.5% for year-end 2023 (representing a 30 bp increase from our prior expectation).”
They predict that the decline in other cities should likely be small enough to create mortgage credit stress that would sharply increase foreclosure.
At the same time, Ingo Winzer, publisher of Local Market Monitor, stated in his January 25, 2023 National Economic Outlook that jobs in December were up 3 percent from last year, a decent increase in normal times. However, the numbers are down from November and down further from October, meaning that growth is slowing. And most growth in the past year was really just recovery from the pandemic, not natural growth. Compared to just before the pandemic, the number of jobs today is less than 1 percent higher.
He believes that this is bad news for real estate markets because, without good economic growth, home prices are likely to decrease steadily over the next two years. Demand will be low with inflation and interest rates being so high.
Business service jobs increased 2.8 percent. Just two months ago it was 4 percent. He states that the lack of growth in business services is a barometer of how well other businesses are doing.
Contact Deepak Malhotra if you need help with real estate investing. Even if you are not looking in Cheney, Medical Lake, Airway Heights, or the Spokane area, mentoring services or referrals can be provided.