The housing slump could worsen this year. (Photo: Fox Business)
The housing slump could worsen this year (GS). According to data from the investment bank, four of the country’s 25 largest metropolitan areas are experiencing oversupply—home price drop—indicating a rocky road ahead.
While housing inventory remains low, these four cities now have more homes for sale than in January 2020. According to the firm, home prices in Austin are expected to fall 19% by the fourth quarter of 2024, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle.
Regionally, the West Coast and Southwest have seen an oversupply that “reflects local challenges, particularly very low levels of affordability, pandemic-related distortions, and in certain markets a high concentration of employment in the technology industry,” according to Goldman.
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In a separate report, Redfin (RDFN) predicted that a home price drop in cities such as San Francisco, Oakland, and San Jose would fall by 3% to 7% in the second half of 2022.
The reason for this is that those cities were among the most expensive in the country, implying that home values have more room to fall. Other causes include a pandemic-fueled mass exodus of residents and technological sector layoffs.
The national housing outlook is less bleak. The bank predicts home prices will fall 6.1% in 2023 as mortgage rates rise to 6.5%.
However, there is a potential risk against this backdrop, as supply remains tight despite new homes under construction entering the market.
Builders continued to slow down home construction in January. The Commerce Department reported on February 16 that the home price drop fell 4.5% to 1.31 million annualized rate, a 21.4% decrease from the previous year.
Other data from the National Association of Realtors shows a decline in existing home sales, while government data shows an unexpected increase in new home sales.
According to the bank, “gradual recovery of home sales in the second half of the year should act as an additional buffer” to the supply outlook.
Even though home buying activity has slowed as the 30-year fixed mortgage rate rises, the supply of multi-family units remains an issue.
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