Housing market predictions: Don’t expect home prices to come down, Goldman Sachs says

A home in Draper is for sale on Wednesday, Oct. 18, 2023.
A home in Draper is for sale on Wednesday, Oct. 18, 2023. | Laura Seitz, Deseret News

If you’re holding out hope for the U.S. housing market to finally buckle with significant home price declines or lower mortgage rates, don’t hold your breath.

That’s according to the latest Goldman Sachs housing forecast released this week, which characterized the national real estate market for the rest of this year and into 2024 as this: “higher for longer.”

Expect “sustained higher mortgage rates,” continued limited availability of housing supply, and continued home price growth — though it will only be slight — as affordability issues will continue to discourage buyers, according to the forecast.

“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 Sachs analysts wrote.


Meanwhile, a swell of multifamily housing construction will help “rent inflation to normalize further even as starts slow,” meaning national rent prices growth is expected to slow but still stay in the green.

“Even though multifamily starts are likely to decline, completions are likely to continue running near their multi-decade high pace, which should help clear the construction backlog and contribute to a modest increase in the rental vacancy rate,” they wrote.

When are mortgage interest rates going to go down?

Today’s housing market slowdown is due in large part to the rapid jump in mortgage interest rates amid the Federal Reserve’s battle with record inflation, jumping from around 3% in 2021 to now close to 8%.

Goldman Sachs strategists expect mortgage rates to “remain elevated for the foreseeable future, dipping to just under 7% by the end of the year.”

In 2024, they expect “sustained higher rates to have the most pronounced impact in 2024 on housing turnover,” according to the forecast. Noting that nearly all current mortgage holders have interest rates below the current market rate, analysts wrote this “lock-in” effect is expected to “push existing home sales even lower in the coming months and limit any rebound next year.”

As such, they expect 2024 existing home sales to decline to the lowest level since the early 1990s.

Are home prices going to crash?

Crash, no. But fluctuate and then slowly ease back up? Yes.

Goldman analysts predict home prices will continue to climb before dipping this winter, then rebounding “only modestly” in 2024.

“Home prices are likely to continue increasing rapidly for the next couple of monthly readings — owing in part to the Case-Shiller home price index’s delayed release time and three-month moving average design mean — before slowing sharply and turning negative into year-end,” they wrote.

Then, their model projects “a rebound to below-trend home price growth ... as rates decline modestly but remain at elevated levels.” In December 2024, they predict national home prices will increase by 1.3% year over year. That’s a downward revision from July, when Goldman predicted a 1.7% home price increase in 2024, Fortune reported.

So far in 2023, home prices have increased an estimated 4.2% “but are likely to fall 0.8% through December for a 3.4% year over year increase,” Goldman analysts wrote.