Housing affordability is currently facing its toughest challenge in decades, but a recent Goldman report indicates that some of the intense pressures may start to ease, providing a glimmer of hope in the coming years. This development is particularly good news for potential homebuyers who have been unable to enter the market due to skyrocketing home prices and the Federal Reserve’s aggressive interest rate hikes.
Analyst Vinay Viswanathan stated in a client note that Goldman is revising down its forecasts for U.S. home price appreciation for the next two years. The firm’s national home price appreciation forecast has been adjusted from 3.2% to 0.5% in 2025 and from 1.9% to 1.2% in 2026.
Viswanathan highlighted three key drivers that influenced the decision to lower the home price appreciation forecast. Firstly, recent data on home price indices has shown a decline, likely indicating a decrease in demand. Secondly, the supply shortage that previously supported strong home price appreciation is slowly recovering. Lastly, there is limited room for mortgage rates to decrease in a softer economic environment.
Despite the downward revision in price forecasts, Viswanathan emphasized that significant national home price declines are unlikely. The report also touched on the prospect of modest relief in housing affordability for potential homebuyers, which is crucial for those who have been priced out of the market in recent years.
The report suggests that mortgage rates are expected to decrease slightly, which combined with the growing gap between income growth and home price appreciation, may help improve housing affordability to some extent, although it will still remain historically poor.
Census Bureau data indicates that a significant portion of young adults aged 18-34 are still living with their parents due to housing unaffordability. Real estate professionals are hopeful for a new Federal Reserve chair who could potentially lower interest rates and revive the housing market.
For more detailed information, the full report from Goldman’s Research team is available to subscribers.