US home prices are expected to climb as the Federal Reserve begins cutting interest rates while the underlying economy is still firm, according to Goldman Sachs Research.
Our analysts increased their forecast for US home price appreciation to 4.5% this year and 4.4% in 2025, up from previous estimates of 4.2% and 3.2% respectively in April.
We spoke with Goldman Sachs Research analyst Vinay Viswanathan about the revised outlook and why homes might become more affordable even as prices continue to climb.
Your team recently upped its forecast for US home prices, noting that “bad news is likely good news” for home prices. What did you mean by that?
It’s a reflection of the fact that labor markets appear to be loosening, which gives the Fed more room to cut. Our economists now forecast the Fed will deliver three consecutive 25 basis point rate cuts at the remaining meetings this year.
Now, if we thought the ability of homebuyers to purchase houses would diminish because of a worsening economy, in which people lose jobs and income and are therefore unable to afford a mortgage, rising prices would be bad news.
But we’re not seeing higher permanent layoffs — at least not yet. The reason we think right now that bad news is good news is that rates are falling because of concerns around employment, and we don’t think those concerns will really affect the housing market without income loss. All you’re really seeing is that the cost of buying, of taking on a mortgage,…
