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Housing analysts revise home price forecast amid a 'resilient' market

Yahoo Finance

Goldman Sachs analysts have revised their expectations for home prices, saying they won't drop as much as expected in 2023. Yahoo Finance reporter Dani Romero joins the Live show to break down the state of the housing market amid inventory challenges.

Video Transcript

[AUDIO LOGO]

AKIKO FUJITA: A new call from Goldman Sachs strategists, changing their tune on how much home prices will drop this year. Yahoo Finance's Dani Romero here with us in studio to discuss how much are we talking about.

DANI ROMERO: Yeah, don't expect a big drop in home prices. Goldman Sachs strategists now expect home prices to drop around 2.2%, compared to their previous forecasts, which was 6.1%. Why the sudden change of mind? The shortage of homes available for sale, that will help bring prices up.

And this comes as the housing market has been resilient. Consumers are adjusting to this higher rate environment. And the major headwind will still be the lack of homes available for sale, the short term they say that'll be a headwind.

But data shows that housing starts have rebounded in April after a year long slump. But again, the tug of war will be between affordability and inventory. That will be the story. And mortgage rates are still pretty high.

SEANA SMITH: Dani, people are out there looking for a home. They want to buy right now. They're looking for any deal maybe that's still out there. Where are those affordable homes?

DANI ROMERO: Goldman Sachs says that out of the 25 markets in the US, 4 of them are considered affordable. That includes Saint Louis, Detroit, Chicago, and Baltimore. Also, a monthly payment, mortgage payment there is about 25% of consumers monthly household income. So I guess that would be considered affordable.

But again, Goldman Sachs points out that their economists expect that the 30-year fixed mortgage rate will end this year at 6.4%. And they also anticipate that the Federal Reserve will be done with their policy tightening as well.

AKIKO FUJITA: Just for markets that are affordable. That's going to be pretty demoralizing if you're in the market for a house. Dani, thanks so much for that.