According to a new report from Goldman Sachs, as high as US home prices are, they have yet to peak. The investment bank projects that home prices — already at record highs — will grow another 16% by the end of 2022.
Since the pandemic hit the world, buyers’ demands for houses have exceeded the supply of available homes, causing the real price to increase severely. According to a new report from Goldman Sachs, the prices can climb up more, and its peak is yet to come. Some investment bank projects are already at their record highs and will grow by another 16% by the end of 2022.
Some analysts at Goldman Sachs suggest that houses in the United States are still relatively affordable due to low mortgage rates historically. The price will get even higher due to the continuity in the increase in demands of buyers and the corresponding low inventory.
As high as US home prices are, they have yet to peak, according to a new report from Goldman Sachs.
The investment bank projects that home prices — already at record highs — will grow another 16% by the end of 2022. https://t.co/NllGXWvPAe
— CNN (@CNN) October 13, 2021
Since the spring, the inventory picture has improved a little since the spring due to more homes for sale and price growth being moderating a bit. However, some Goldman’s analysts say that this supply and demand imbalance will continue throughout the following year.
It is questionable whether the demand will remain as strong as now due to the high prices. According to a report, about two-thirds of respondents on a survey conducted on homebuyer sentiment in the University of Michigan survey said that this is not a suitable time to buy a home. This is the highest price since the early 1980s. However, some of the buyers are still adamant about buying homes despite the bad time.
House that a buyer can afford
The Goldman Sachs model looked at supply, demand, affordability, and home prices. It projects that strong demand and tight supply will gradually erode affordability and make homes so pricey that more people will drop out of the market.
That reduced demand will ultimately allow for more inventories on the market, and eventually, the supply-demand imbalance will ease. However, not before prices jump another 16% by the end of next year.
In addition to the above, the home prices and rents will also move higher. Some regulatory efforts from the White House, the Congress, or the states individually or municipalities of the area to alleviate the housing shortage will not be enough at this time.
Political wills have been at odds over efforts to relax zoning rules and other regulatory restrictions that slowed the homebuilding for decades. Despite many economic types of research showing such efforts would probably boost their supply and lower homes prices and rents. Nationally, the White House planned is to make use of some housing funding from the reconciliation bill to increase the affordable housing prices. If any proposed housing grants and tax subsidies are cut through, this may not have the contemplated effects.
Some successful efforts include California’s recent abolition of single-family zoning in the state, which could mean that over 60,000 new single-family homes will be permitted each year. This is likely to become thousands of additional units. The Goldman Sachs analyst wrote in the report that these nationwide changes are unlikely for now, and the limited changes by the state and local authorities are only a small step towards relieving the housing shortage.