As interest rates continue to increase, house prices in the US have been falling, and Goldman Sachs has warned that this trend is set to continue for the next three years. They foresee that four cities in particular – San Jose, Austin, Phoenix, and San Diego – could experience a decrease in prices of over 25%, a similar drop to that seen during the Great Recession in 2008. This is likely due to elevated interest rates staying in place for much longer than predicted, causing mortgage rates to rise to 6%.
Goldman Sachs anticipates that the Northern and Southern states will experience milder corrections than the Southwest and Pacific Coast cities, with New York and Chicago seeing barely any decrease in house prices. In comparison, Baltimore and Miami are likely to experience some growth.
The investment bank also predicts that if the economy manages to avoid a recession, and the 30-year fixed mortgage rate falls back to 6.15% by the end of 2024, house prices should return to below-trend appreciation. The average 30-year fixed mortgage rate hit its peak in November at 7.37%.