The Wall Street bank released its outlook for key housing stats through 2027, and its chief economist said the immediate risk of a US recession is low.
Bob Gothard/ Wallace and Co. Sotheby's International Realty
Goldman Sachs expects the frozen housing market to thaw just slightly over the next four years, according to an outlook from a team of strategists led by chief economist Jan Hatzius.
For 2023, the bank's preliminary estimate for housing starts sits at 1.390 million. Over the next four years, Goldman expects that to inch higher to 1.335 million in 2024, 1.430 million 2025, 1.515 million in 2026, and finally 1.535 million in 2027.
As for new home sales, Goldman sees that figure ending the year at 680,000. In 2024, the bank said it will move to 723,000, before climbing to 771,000 and 781,000 in 2025 and 2026, respectively, before hitting 858,000 in 2027.
Existing home sales, meanwhile, which Goldmans' preliminary estimate puts at 4.092 million for this year, will dip next year to 3.834 million.
Existing sales in the bank's view will rebound in 2025 to 4.240 million in 2025, and 4.369 million and 5.001 million the two years afterward.
That last figure illustrates that even by 2027, the Wall Street firm doesn't expect existing home sales to reach either the pre-pandemic level of 5.34 million or the 2021 boom of 6.12 million, as ResiClub pointed out in a note Tuesday.
Over the last two years, low inventory, rising home prices, and skyrocketing mortgage rates have made it difficult for Americans to enter the housing market, either as buyers or sellers. Conditions have made many homeowners reluctant to move, which has left house hunters with fewer options to choose from.
Broadly, Goldman's Hatzius said the risk of a recession in the US remains low. He added the Federal Reserve should be able to achieve a soft-landing of the economy, a forecast which has gained momentum across Wall Street over recent months.
Easing inflation and a cooling labor market has sparked bets the central bank could cut interest rate cuts as soon as March 2024, though in a Friday interview with CNBC, Hatzius maintained that markets may be getting too excited over the prospect of easing monetary policy.
"I think in the second half of the year is more realistic than the first half, but again, it's going to depend on the data," he said, referring to the potential for rate cuts.
An outlook from Zillow economists at the end of November predicted that home-buying costs will ultimately level off next year.
"Predicting how mortgage rates will move is a nearly impossible task, but recent inflation news gives the impression that rates are likely to hold fairly steady as well in the coming months," Zillow researchers said. "Taken together, the cost of buying a home looks to be on track to level off next year, with the possibility of costs falling if mortgage rates do."
