Goldman Sachs is predicting a big drop in housing values in four American cities:
In a note to clients earlier this month, Goldman Sachs forecasted that four American cities in particular should gear up for a seismic decline compared to that of the 2008 housing crash.
San Jose, California; Austin, Texas; Phoenix, Arizona; and San Diego, California will likely see boom and bust declines of more than 25%.
Such declines would rival those seen around 15 years ago during the Great Recession. Home prices across the United States fell around 27%, according to the S&P CoreLogic Case-Shiller index…
In 2023, the investment bank expects home prices to barely fall in cities like New York (-0.3%) and Chicago (-1.8%) while predicting higher prices in Baltimore (+0.5%) and Miami (+0.8%).
It make sense that a company interested in investments and finance would want to make such a prediction. Will it change people’s behavior? A few ways this might matter:
-Local homeowners try to sell now before the big decline or prepare to stay put longer so they can see an increase in values. Either way, the supply of homes for sale is affected.
-Builders and developers reduce their construction and plans. They wait to see how long such a decline lasts. They hope to weather this and have higher profit margins later.
-Local governments steel for the impacts to tax revenues and population growth.
-People who might consider moving to or investing in the area reconsider. Would lower housing values make the area more attractive? (This might conflict with fewer homes for sale.)
Does such a prediction become a self-fulfilling prophecy to some degree as people wait for the drop in home prices?