PHOENIX – Goldman Sachs says Phoenix is one of four cities that could see a housing crash to rival what we saw in 2008 – but a local expert says the numbers and trends don't add up.
The investment bank is predicting drastic decreases in home prices – as much as 25%. Back in 2008, we saw drops up to 27%.
Why? Goldman Sachs says this is due to the cities becoming too detached from fundamentals during the COVID-19 housing boom.
Goldman Sachs also forecasts that many Northeastern, Southeastern, and Midwestern markets could see milder corrections.
Home prices are expected to dip slightly in New York City (-0.3%) and Chicago (-1.8%), while Baltimore (+0.5%) and Miami (+0.8%) will see higher prices, the firm said.
"Assuming the economy remains on the path to a soft landing, avoiding a recession, and the 30-year fixed mortgage rate falls back to 6.15% by year-end 2024, home price growth will likely shift from depreciation to below-trend appreciation in 2024," Goldman Sachs wrote.
The other three cities are San Jose and San Diego, California, and Austin, Texas.
"What they were saying is not in line with what our local analytics were telling us," says Tina Tamboer with the Cromford Report. "Goldman Sachs, since November, has been all over the place in where they believe mortgage rates will go. If you are optimistic about mortgage rates then you’re going to feel pretty optimistic about this quarter and where prices might go."
Tamboer says the comparison to the ‘08 crash doesn’t add up.
"Just not comparable. We dropped 58 to 60% in value during the 2008 crash, and they’re predicting 25 percent. So it’s really not a comparable scenario," Tamboer explained.
Mortgage rates jumped from 3% to 6% in 2022 and housing prices in the Valley have generally seen a decrease, but Tamboer says this is more of a stabilization of the market than anything else.
"What we do at the Cromford Report is we look at just literally what’s supply doing, what’s demand doing, how is it looking from a seasonal standpoint. Our records are showing that we just came out of a buyers market which was in December. We came into a balanced market and then just within the past few days we’re just on the edge of a balanced and seller market," she explained.
Mortgage rates doubled in 2022 – from 3 to 6% – taking some buyers out of the game. It also made the market less competitive and less stressful for those wanting to buy.
"We started about a year ago looking at different options, ended up taking a rental option. But, now that things have settled in and the inventory’s good we’ve decided to make the move to buy one," says a local buyer named Cathy Annsaleh.
Her real estate agent says it's extremely dependent on the city or town they're looking in, because even within the Valley, the housing market isn't one size fits all.
"Most stats that we see are for the Valley-wide, and that’s not accurate because real estate is hyper-local. Every city has a different market and those markets have submarkets and markets within markets," explains Justin Thorstad with Libertas Real Estate.
The Federal Reserve has decided to raise interest rates yet again, but this time, it is only going up by half a percentage point. This brings rates to their highest level since 2007.
A new housing loan program goes into effect next month that bumps up the loan limit to about $750,000 with just a 3 percent down payment. People still have to quality, but this is just one of many shifts in the market. FOX 10’s Linda Williams reports.
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