In 2023, the US as a whole is predicted to see a total stop in home price increase as buyer demand declines and the market remains oversupplied with homes.
The projection was made by Goldman Sachs experts, who said that certain places are extremely likely to see price drops, but not by a significant amount. In the second quarter, the US’s typical house cost $525,000.
In a research conducted by economist Jan Hatzius, Goldman said, “We estimate house price growth to freeze altogether, averaging 0% in 2023.” The firm added, “While outright decreases in national home prices are feasible and are fairly plausible for certain locations, substantial drops seem unlikely.”
According to Bloomberg, the survey concluded that the current era of rising housing prices and the slowing of the pandemic-born demand surge had discouraged purchasers from the market.
According to Goldman, “existing home sales and building permits have declined more sharply this year in regions where they increased the most in the earlier part of the pandemic, suggesting that the recent declines have also reflected the partial retreat of a pandemic-related boost to housing demand.”
Since the epidemic, US average home prices have been rising gradually, and from the beginning of 2021 through Q2 of 2022, they soared significantly.
Average house selling prices in 2021 rose from $418,600 in the first quarter to $440,600 in the second, and then to $473,000 in the third. They increased from $514,100 in the first quarter of this year to $525,000 in the second, but experts believe that growth is now leveling off, and some have even predicted further declines.
The research comes as the Federal Reserve has warned that interest rates – driven up in the battle against soaring inflation – are likely to continue to climb and remain high ‘for some time,’ Federal Reserve Chair Jerome Powell said.
According to Fortune, Moody’s Analytics head economist Mark Zandi concluded that if the recession worsens, prices won’t only plateau but may instead fall by as much as 20%. Goldman’s prognosis is consistent with other experts’ expectations.
The news is especially bad for homeowners who bought properties in so-called “bubbly” regions, with Austin, Texas, Charlotte, North Carolina, and Boise, Idaho, all being included as the most overpriced markets.
However, there are 180 other places in the US where real estate is seen to be overpriced, most of it in a very desirable location.
They include LA, Orlando, Seattle, and Indianapolis, all of which are said to have property that is 30% overpriced.
While residences in Montana are overpriced by 25%, homes in Houston are around 34.5% overvalued.
According to Moody’s, houses in the picturesque Oregon city of Bend, which is often named one of the greatest places to live in the country, are 43.8 percent overpriced, while Billings, Montana, has homes that are 25% overvalued.
A study from Florida Atlantic University also reinforced the Goldman prediction, finding that housing premiums -the price homes were expected to sell at verses the price they actually sold for – declined in 27 major metro areas across the country.
Goldman Sach economist Jan Hatzius predicted US home price growth will stall completely in 2023
This indicates that markets have reached their peak and that prices will now begin to normalize, according to Ken Johnson, an economist at Florida International University.
The analysis found that rates rose throughout the summer in almost all of the state’s cities, with Florida seeming to be the exception.
The forecasts come weeks after the US Federal Reserve increased the benchmark interest rate to 2.5%, and another rise to 3.4% is anticipated by year’s end as the Fed attempts to control inflation.
These interest rate increases are predicted to worsen the US recession and drive down the price of real estate since they will make it prohibitively costly for many people to get a mortgage, which would severely reduce demand.