Goldman Sachs released its latest 2024 housing outlook. While it says “sharpest declines in housing activity and prices are now long behind us,” it expects mortgage rates to stay high for the foreseeable future.
Experts including chief economist Jan Hatzius don’t expect rates to fall under 7% until the end of next year.
Goldman Sachs forecasts home prices will fall 0.8% through December of this year. But since rates have risen about 4.2% this year, that still makes for a 3.4% year-over-year bump.
As for next year, Goldman predicts home prices will increase by 1.3%. That’s a downward revision from their previous forecast of a 1.7% increase in July. This more modest rise is due to tight supply and the impact of high rates on affordability.
Goldman says that sustained high mortgage rates will lead to the lowest rates in existing home sales since the early 1990s. As it stands, last month, existing home sales dropped by 15% from the previous year. That’s the lowest figure since 2010, says the National Association of Realtors.
Goldman also mentioned the limited housing supply, and how it has insulated homebuilders against the rate spike.
While housing starts were 5% higher in September than pre-pandemic levels, it doesn’t expect this trend to continue. It predicts a 4% decline in housing starts by 2024, primarily due to a decrease in multifamily starts. The forecast suggests that multifamily starts will total less than 350,000, the lowest level since 2013.
Morgan Stanley, on the other hand, changed its forecast. It now predicts a 5% increase in home prices this year (it had previously anticipated a drop in prices for 2023 and 2024). It said that a 5% inventory bump next year, plus no change in sales, would bring a 5% decrease in home prices in 2024.
Other economic forecasts for 2024 home prices range from over 1% to less than 4%, except for the AEI Housing Center. AEI expects a 6% rise in 2023 home prices and a 7% leap in 2024.
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