Goldman Sachs Predicts 2008-Style Housing Crash in These Cities

Goldman Sachs Expect home values to decline through 2023 due to skyrocketing interest rates, and falling housing prices.

This month, the firm wrote to its clients that it predicted four cities in the United States would experience the worst dips. It draws comparisons with the 2008 housing crash.

San Jose, California, San Diego, California, Austin, Texas, and Phoenix, Arizona will see increases that are noticeable before any drastic drops of more than 25 percent.

These declines will be similar to 2008’s Great Recession. According to the S&P CoreLogic Index Case-Shiller, home prices in the United States fell by around 27%.

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Goldman Sachs predicts that home values will decline through 2023 due to skyrocketing interest rates, and falling housing prices. (Reuters Photos)

“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,” According to the New York Post, strategists at Goldman Sachs wrote. “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).”

In 2022 mortgage rates It jumped from 3% up to 6%

“This [national] decline should be small enough as to avoid broad mortgage credit stress, with a sharp increase in foreclosures nationwide seeming unlikely,” Goldman Sachs wrote. “That said, overheated housing markets in the Southwest and Pacific coast, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will likely grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages originated in 2022 or late 2021.”

San Jose, California, San Diego, California, Austin, Texas, and Phoenix, Arizona (pictured) will see increases that are noticeable before any drastic decreases of over 25%. (iStock / iStock)

According to the bank, these cities will be affected by the lowest prices This was because they were too disconnected from the fundamentals during COVID-19’s housing boom.

Goldman Sachs forecasts that several Northeastern and Southeastern markets will experience milder corrections.

According to the firm, home prices will drop slightly in New York City (-3.3%) and Chicago (-1.8%), while prices in Baltimore (+0.5%) or Miami (+0.8%) will rise.

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New York City’s and Chicago’s home prices will likely drop slightly, while Baltimore and Miami (pictured above) will see increased prices. (iStock / iStock)

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“Assuming the economy remains on the path to a soft landing, avoiding a recession, and the 30-year fixed mortgage rate falls back to 6.15% by year-end 2024, home price growth will likely shift from depreciation to below-trend appreciation in 2024,” Goldman Sachs wrote.

At its peak in November, the average 30-year fixed mortgage rate stood at 7.37%.