Home prices in four major cities in the United States that have boomed during the COVID-19 pandemic are expected to fall significantly by the end of 2024, according to a new study from Goldman Sachs.
In a note to clients, Goldman said that Austin, Seattle, Phoenix and San Francisco could each see prices drop into the mid-single digits as home availability exceeds demand, Insider said.
Prices in Austin are expected to fall by 19 percent from 2022, prices in Phoenix by 16 percent, San Francisco by 15 percent, and Seattle by 15 percent.
Goldman analysts said these changes reflected market responses to “pandemic-related disruptions” and “local challenges,” while pointing out that many of the affected cities are technology industry hubs that have seen major layoffs recently.
The news comes as home sales nationwide fell again for a twelfth straight month, falling 36.9 percent in January from the same time in 2022.
In those four cities, the prices of expensive homes are already falling.
In Austin, a five-bedroom, four-bathroom 2,750-square-foot home plummeted 18.4 percent from $2.2 million to $1.8 million in February.
In Phoenix, a 6,495-square-foot four-bed, five-bathroom home from $6.6 million fell 10.4 percent from $7.4 million this month.
San Francisco saw a six-bedroom, six-bathroom, 6,850-square-foot home drop 10 percent from $5.6 million to $4.9 million late last year.
And in Seattle, a three-bedroom, three-bathroom 3,280-square-foot home fell 11.9 percent from $2.9 million to $2.5 million.
Goldman said the problem may be localized to those specific cities and may not affect the rest of the country as severely.
“Rather than being indicative of things to come across the country, we view the burgeoning oversupply in the Pacific Coast and Southwest markets as a reflection of local challenges, particularly very poor affordability, pandemic-related disruptions and (in certain markets) a high concentration of employment in the technology industry,” the Goldman analysts said, according to Insider.
The analysts said the housing stock remains at a record low, helping to avoid a bigger problem in the housing market.
“Even if every home under construction were completed and put on the market immediately,” the analysts said, “the number of homes in the month (the ratio of inventory to annual sales) would still be below historical averages.” they wrote.
The forecast comes as the US housing market remains volatile, with the latest data from the National Association of Realtors showing home sales falling for the 12th consecutive month.
In Austin, this 2,750-square-foot, five-bedroom, four-bath home plummeted 18.4 percent from $2.2 million to $1.8 million in February
In Phoenix, this $6.6 million, four-bed, five-bath, 6,495-square-foot home fell 10.4 percent from $7.4 million this month
The NAR’s survey published Tuesday found that home sales fell 36.9 percent in January to 4 million, up from 6.34 million in January 2022.
“Home sales have bottomed out,” said Lawrence Yun, NAR Chief Economist.
“Prices vary depending on the affordability of a market, with lower priced regions showing modest growth and more expensive regions declining.”
The decline was nationwide, but was most pronounced in the West, where sales fell 42.4 percent year-on-year. The median price in the West is the most expensive in the country at $525,200, down 4.6 percent from January 2022.
In the Northeast, they fell 35.9 percent; in the south a decrease of 36.6 percent.
The Midwest fared slightly better, with existing home sales falling 33.3 percent.
The median home in the Northeast was $383,000; in the South it was $332,500; while in the Midwest it was the cheapest in the country, at $252,300.
In Seattle, this 3,280-square-foot, three-bedroom, three-bath home fell 11.9 percent from $2.9 million to $2.5 million.
San Francisco saw this six-bedroom, six-bathroom, 6,850-square-foot home drop 10 percent from $5.6 million to $4.9 million late last year.
The median price for an existing home across all home types in January was $359,000, up 1.3 percent from January 2022, when the figure was $354,300.
Cities where home prices are falling include San Francisco and San Jose, both in California, and Austin, Texas.
San Jose had one of the biggest declines but is still the most expensive place to buy a home in the country at an average price of $1,577,500. Prices peaked at $1.9 million in early 2022.
San Francisco’s average home prices fell 1 percent to $1.78 million between 2021 and 2022, according to new data from Compass, the first annual decline the city has seen in a decade.
And in Austin, homes remain expensive at an average price of $525,250 in December, but the figure represents a 5.4 percent drop from December 2021, according to KVUE.
The slack market is largely due to the stubbornly high mortgage interest rates.
A 30-year fixed mortgage will currently be at 6.32 percent — significantly higher than rates of less than 3 percent in 2020.
The rates have been above 6 percent since mid-2022.
“Houses are on the market longer,” says Yun. ‘But there are fewer new offers on the market in January than in January last year.
“This is because homeowners love their low interest rates and don’t want to give it up and put their home on the market.”
