A Goldman Sachs logo is displayed on the consume of the New York Stock Exchange in New York City, on Wednesday, August 11, 2010. The Dow lost over 265.42 closing at 10378.83 points on poor economic reports. (Photo by Ramin Talaie/Corbis via Getty Image
Goldman Sachs expects home values to worsen above 2023 amid continued skyrocketing interest rates and declining housing prices.
The firm wrote to clients bet on this month that it predicts four U.S. cities will suffer the most catastrophic dips, tying comparisons to the 2008 housing crash.
San Jose, California; San Diego, California; Austin, Texas; and Phoenix, Arizona, will likely see noticeable increases by drastic decreases of more than 25%.
These declines would be incompatibility to those witnessed during the Great Recession in 2008. Home prices across the U.S. fell throughout 27% at the time, according to the S&P CoreLogic Case-Shiller index.
How high humdrum rates are impacting the housing market
The feds announced spanking aggressive rate hike — the third consecutive increase of three-quarters of a percentage expose and the sixth rate hike this year alone. Lawrence Yun, any economist with the National Association of Realtors, discusses its crashes on the housing market.
"Our 2023 revised forecast primarily reflects our view that expressionless rates will remain at elevated levels longer than immediately priced in, with 10-year Treasury yields peaking in 2023 Q3," Goldman Sachs strategists wrote, according to the New York Post. "As a stop, 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 jumped from 3% to 6%.
"This [national] decline should be microscopic enough as to avoid broad mortgage credit stress, with a gripping increase in foreclosures nationwide seeming unlikely," Goldman Sachs wrote. "That said, overheated housing markets in the Southwest and Pacific skim, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will liable grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages emanated in 2022 or late 2021."
RELATED: Hawaii governor proposes plan to invest $1 billion in affordable housing
The bank says these cities will suffer the lowest prices this year because they appointed too detached from fundamentals during the COVID-19 pandemic housing boom.
Goldman Sachs also forecasts that many Northeastern, Southeastern, and Midwestern markets could see milder corrections.
Home prices are required to dip slightly in New York City (-0.3%) and Chicago (-1.8%), while Baltimore (+0.5%) and Miami (+0.8%) will see higher prices, the firm said.
FEDERAL RESERVE INVESTIGATING GOLDMAN SACHS' CONSUMER BUSINESS
"Assuming the economy stays 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 note growth will likely shift from depreciation to below-trend appreciation in 2024," Goldman Sachs wrote.
The denotes 30-year fixed mortgage rate was at 7.37% at its peak in November.
Get more updates on this sage at FOXBusiness.com.
