Austin, Seattle, Phoenix and San Francisco will see double-digit declines in home prices

Home prices in four major US cities that experienced booms during the COVID-19 pandemic are expected to decline significantly by the end of 2024, according to a new Goldman Sachs study.

In a note to clients, Goldman said Austin, Seattle, Phoenix and San Francisco could see prices fall in the mid-digits as home availability outpaces demand, according to Insider.

Austin prices are expected to fall 19 percent from 2022 levels, Phoenix prices could decline 16 percent, San Francisco 15 percent and Seattle is projected to fall 15 percent.

Goldman analysts said those changes reflected market reactions to “pandemic-related distortions” as well as “local challenges,” noting that many of the affected cities are tech industry hubs that have recently suffered. big layoffs.

The news comes as the number of nationwide home sales declined again for the 12th straight month, falling 36.9 percent in January from the same time in 2022.

Already in those four cities, prices for expensive homes have started to drop.

In Austin, a 2,750-square-foot five-bedroom, four-bathroom home plummeted 18.4 percent, from $2.2 million to $1.8 million in February.

In Phoenix, a $6.6 million 6,495-square-foot four-bedroom, five-bathroom home is down 10.4 percent this month from $7.4 million.

In San Francisco, a six-bedroom, six-bathroom, 6,850-square-foot home fell 10 percent, from $5.6 million to $4.9 million at the end of last year.

And in Seattle, a 3,280-square-foot three-bedroom, three-bathroom home was down 11.9 percent, from $2.9 million to $2.5 million.

Goldman said the problem may be localized to those particular cities and may not affect the rest of the country as severely.

“Rather than being indicative of things to come across the country, we believe that the emerging oversupply in the Pacific Coast and Southwest markets reflects local challenges, particularly very low levels of affordability, distortions related to the pandemic and (in certain markets) a high concentration of employment in the technology industry,’ Goldman analysts said, according to Insider.

Analysts said home supply will remain at a record low, helping to avert a broader housing market blight.

“Even if every home under construction were completed and listed on the market immediately,” the analysts said, “the monthly supply of homes (the ratio of inventory to annual sales) would still be below historical averages,” they wrote. .

The prediction comes as the US housing market remains on shaky ground with the latest data from the National Association of Realtors showing home sales falling for the 12th straight month.

The NAR survey, released Tuesday, showed January home sales fell 36.9 percent to 4 million, down from 6.34 million in January 2022.

“Home sales are bottoming out,” said Lawrence Yun, NAR’s chief economist.

“Prices vary depending on the affordability of a market, with the lowest priced regions seeing modest growth and the most expensive regions seeing declines.”

The decline was nationwide, but steepest in the West, where sales fell 42.4 percent year-over-year. The median price in the West is the most expensive in the country at $525,200, down 4.6 percent from January 2022.

In the Northeast they fell by 35.9 percent; in the south 36.6 percent.

The Midwest fared slightly better, with existing home sales falling 33.3 percent.

The median home in the Northeast was at $383,000; in the South it was $332,500; while in the Midwest it was the cheapest in the country, at $252,300.

The median existing home price for all home types in January was $359,000, an increase of 1.3 percent from January 2022, when the figure was $354,300.

Cities where home prices are declining include San Francisco and San Jose, both in California, and Austin, Texas.

San Jose had one of the biggest drops, but remains the most expensive place to buy a home in the country at a median price of $1,577,500. Prices peaked at $1.9 million in early 2022.

Median home prices in San Francisco fell 1 percent to $1.78 million between 2021 and 2022 in the first annual drop the city has seen in a decade, according to new data from Compass.

And in Austin, homes remain expensive at a median price of $525,250 in December, but the figure represents a 5.4 percent drop from December 2021, according to KVUE.

The sluggishness of the market is due in large part to stubbornly high mortgage rates.

A 30-year fixed mortgage will currently be at 6.32 percent, significantly higher than the sub-3 percent rates seen in 2020.

Rates have been above 6 percent since mid-2022.

“Houses stay on the market longer,” Yun said. ‘But there are fewer new listings on the market this January compared to last January.

“This is because homeowners love their low interest rate and don’t want to give it up and put their house on the market.”