Goldman Sachs economists expect US home-price growth to slow next year

GOLDMAN Sachs Group predicts home prices in the US will grow only modestly next year with mortgage rates likely to stay elevated.

Prices will rise 1.3 per cent in December 2024 from a year earlier, compared with a 3.4 per cent gain expected in 2023, Goldman economists including Jan Hatzius said on Sunday (Oct 22).

Buyers have been confronting much higher borrowing costs with one measure of the interest rate on a 30-year fixed mortgage hovering near 8 per cent. Homeowners have also become more reluctant to list properties, limiting inventory for sale. Goldman’s strategists expect mortgage rates to stay higher for some time and dip just under 7 per cent by the end of next year.

“While the sharpest declines in housing activity and prices are now long behind us, the recent jump in mortgage rates and prospect that they could remain elevated for the foreseeable future present headwinds to the economy’s most interest-rate sensitive sector,” Goldman economists said in the note.

Owners not wanting to list homes will continue to weigh on transactions. Goldman expects sales of previously owned homes to fall to 3.8 million in 2024, the lowest since the early 1990s. Supply will be further constricted by a nearly 4 per cent decline in housing starts in 2024, according to the bank’s forecast. BLOOMBERG