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Goldman on the hampered housing market: 'Further to Fall'

Rising interest rates are thwarting the U.S. housing market's momentum, hammering many stocks tied to the fortunes in the sector.

Shares of Toll Brothers and KB Home are down 15% and 22% in the last six months alone — with the former pressured by a weak second quarter and outlook for growth earlier in August — while the SPDR S&P Homebuilders ETEF has shed 12% in the last six months.

Goldman Sachs Chief Economist Jan Hatzius asserted that further housing pressure is likely, writing in a new note ominously titled: "Housing Downturn: Further to Fall."

Here are Hatzius' two calls on housing.

On home sales:

  • "The sustained reduction in affordability, waning pandemic tailwind, and recent decline in purchasing intentions suggest that home sales are likely to fall further on net: we forecast existing home sales of 4¼ million in Q4 (seasonally adjusted annualized rate; -12% vs. July) and new home sales of ½ million (flat). This lowers our residential fixed investment growth forecast to -15% in 2022 and 0% in 2023 (both Q4/Q4), vs. -13% and +1½% previously."

A "For Sale" sign is posted outside a residential home in the Queen Anne neighborhood of Seattle, Washington, U.S. May 14, 2021. REUTERS/Karen Ducey (Karen Ducey / reuters)

On home prices:

  • "Our model suggests that home price growth will slow sharply in the next couple quarters (+8½% quarter over quarter annualized rate (AR) in Q3, +3% quarter over quarter AR in Q4, corresponding to +14% Q4/Q4 in 2022), as the imbalance between supply and demand continues to shrink, mostly through lower demand. Thereafter, we expect home price growth to stall completely, averaging 0% in 2023. While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely."

A chart in Hatzius' note says it all:

Housing is weakening.
Housing is weakening. (Goldman Sachs)

The industry vibe in housing:

  • Existing home sales fell for the sixth consecutive month in July, the National Association of Realtors stated. Sales dropped 5.9% from June and 20.2% from a year ago. The median existing home sales price rose 10.8% year over year to $403,800 but was off $10,000 from a record high in June.

  • The Commerce Department, meanwhile, reported that sales of new U.S. single-family homes tanked 12.6% in July. At 511,000 units in the month, new home sales were at the lowest level since January 2016.

From the Yahoo Finance Live archive: Redfin CEO Glenn Kelman on August 9:

  • "I do think that we're going to go through a painful volatile period here [in the housing market]," Kelman said (video above).


Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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