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High mortgage rates, inflation and low supply have made the path to home ownership difficult lately. As house prices seem to be calming down, some experts are warning that a potential housing market crash could be on the horizon – but not all regions will fare the same.
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Goldman Sachs strategists wrote in a Jan. 23 note that the investment bank expects “a peak-to-trough decline in national home prices of about 6% and prices will stop declining around the midpoint.” of the year”.
“On a regional basis, we expect larger declines in the Pacific Coast and Southwest regions – which have seen the largest stock increases on average – and more modest declines in the Mid-Atlantic. and the Midwest – which have maintained greater accessibility over the past two years. years.”
In a separate note, the investment bank said a few cities will be particularly vulnerable: San Jose, Calif.; Austin, TX; Phoenix, Arizona; and San Diego, California. These cities will likely be “stricken with declines of more than 25% from peak to trough,” according to the note.
According to the New York Post, “Such declines would rival those seen about 15 years ago during the Great Recession.”
However, Goldman Sachs added that this national decline “should be small enough to avoid widespread stress on mortgage lending, with a sharp increase in nationwide foreclosures looking unlikely.”
Goldman Sachs also said it has revised its forecast for 2023 as it believes interest rates will remain at elevated levels. In turn, he raised his forecast for the 30-year fixed mortgage rate to 6.5% for the end of 2023.
National Association of Realtors (NAR) Chief Economist Lawrence Yun detailed in a 2023 forecast that housing inventory is expected to remain tight in 2023, with housing starts below historical averages and fewer of owners willing to sell.
Yun, however, added that he saw “many encouraging signs for the start of next year.”
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Although current conditions do not indicate a housing market crash, a few factors could lead to it, according to US News & World Report. These include a drastic increase in unemployment, a prolonged housing shortage and weaker aggregate demand.
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