Goldman Sachs predicts home prices will rise 16% in 2022 »RealtyBizNews: Real estate news


The housing market is on fire, with house prices up 20% today from a year ago. But if you thought the market couldn’t get any warmer and things might start to cool down soon, think again, because analysts believe there are even more house price hikes on reserve for 2022.

Goldman Sachs said last week that it expects home prices grow by an additional 16% by the end of 2022, even as some signs have emerged that buyers may have an easier time soon.

Goldman Sachs points out in its forecast that the rapid increases in home prices over the past year are due to several contributing factors, including low interest rates that make mortgages cheaper than ever. Added to this are the migration patterns brought on by the coronavirus pandemic that have seen many remote workers move to more affordable areas, as well as more millennials trying to become homeowners. Investors have also stepped up their buying activity as they see housing as a major asset. Meanwhile, builders’ construction activity has been crippled by shortages of materials and labor.

All of this is a perfect storm for home sellers, and it’s unlikely to abate anytime soon, economists at Goldman Sachs believe.

“The supply and demand picture that was the basis of our call for a multi-year house price boom remains intact,” said Jan Hatzius, chief economist and head of the global economy and the economy. Goldman Sachs market research. “Home inventories remain historically tight and surveys of home buying intentions remain at healthy levels.”

A recent surge in pending home sales had sparked some optimism, with National Association of Realtors chief economist Lawrence Yun saying earlier this month noting a slight increase in inventories and moderation in prices. that brought more buyers back to the market. However, he cautioned that affordability issues are likely to persist. And indeed, the available housing stock is still well below normal levels. In addition, the residential construction industry remains unable to fill the void as its own problems persist. Data from the United States Bureau of Labor Statistics shows that construction employment is 201,000 jobs lower than it was before the pandemic, for example.

One possible solution to the low inventory, put forward by economists at Goldman Sachs, is to relax city zoning laws.

“Economic research shows that relaxing zoning rules and other regulatory constraints that have hampered housing construction for decades would boost supply and lower prices and rents,” Hatzius wrote. “But in practice it has been difficult politically.”

Progress has been made, with states like Oregon and Minneapolis both successfully removing single-family home zoning laws in 2019 following a push from former U.S. Housing and Urban Development Secretary Ben Carson, who served under President Trump. More recently, California has followed suit, but analysts say these changes are unlikely to spread across the rest of the United States

Without the possibility of relief on the factors that determine home prices, most analysts believe the market will continue to accelerate. Fannie Mae, in his October economic forecast, predicted more moderate home price gains of 7.4% in 2022, up from its earlier forecast of 5.1%.

At the same time, Fannie Mae believes the continued pressure on prices will cause total home sales to drop next year, from 6.77 million this year to 6.54 million in 2022.

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