NEW YORK-Researchers at Goldman Sachs have released a new paper that now forecasts that activity in the U.S. housing market will end 2022 down across the board.
In the new paper titled “The Housing Downturn: Further to Fall,” the investment bank is forecasting declines this year in new home sales (22% drop), existing home sales (17% drop), and housing GDP (8.9% drop).
As noted by numerous analysts, including Fortune, the housing downturn is a one result of rising rates being pushed by the Federal Reserve as it seeks to tame inflation.
But there is another driving force behind the housing downturn, according to Fortune: household formation.
“The pandemic—and the WFH revolution it set off—saw a historic spike in household formation. Can you blame Gen Zers for not wanting to work from home alongside their roommate?” Fortune stated. “But that phenomenon is over now, according to Goldman Sachs.”
‘More Fleeting Than We Expected’
The Goldman Sachs researchers added, "Some of the recent weakness appears to reflect the reversal of pandemic-related preference shifts that are proving more fleeting than we’d expected. We previously noted that the virus shock accelerated household formation and boosted demand for second homes... [but] those tailwinds have already largely faded, as regions that experienced outsized increases in home sales and building permits in 2020 and 2021 are now experiencing disproportionate declines this year," write Goldman Sachs researchers.
Looking forward, Goldman Sachs expects home price growth to decelerate significantly. The investment bank expects home prices to rise just 1.8% in 2023.