Goldman Sachs now sees US house prices bottoming out this summer but down around 6% compared to its previous forecast of -10%.
They outlined three reasons a steeper correction wont take place:
"First, the rapid build-up of untapped home equity over the last couple years means that even if [home] prices declined more sharply than we expect, only a small share of mortgage borrowers would be underwater, Second, over 90% of outstanding mortgages are fixed rate, meaning that the rise in interest rates will not lead to a spike in debt service costs for most homeowners. And third, household balance sheets remain strong, with low aggregate leverage and considerable remaining pent-up savings from the COVID-19 pandemic."
Most of the decline has already taken place and now Goldman Sachs sees US house prices down just 2.6% this year. However that could change if the Federal Reserve hikes rates above 5.25%. There have been recent signs of a pickup in housing activity, helped by homebuilder buydowns and lower interest rates but today US 10-year yields hit a one-month high of 3.66%.
