The U.S. housing market is moving full steam ahead into a post-Great Financial Crisis downturn, and while housing costs soar and home sales slow at the fastest pace in over two years, experts say the worst is yet to come. Researchers at Goldman Sachs predict that new home sales will drop 22% by the end of 2022, while existing home sales and housing GDP will fall 17% and 8.9%, respectively.
On top of the Federal Reserve’s interest rate hikes, a housing downturn is also the result of slower household formation following the COVID-19 pandemic, Fortune reports. As the Great Migration slows and fewer house hunters flood the for-sale market, the post-pandemic housing downturn seems to just be getting started.
"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," writes Goldman Sachs researchers.
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