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Goldman Sachs: Home prices will rise another 16% by the end of 2022

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But as high as the prices are, they haven’t peaked yet, according to a new report from Goldman Sachs.

The investment bank predicts that home prices – already at record highs – will rise another 16% by the end of 2022.
Despite price increases of 20% over the past year, Goldman Sachs analysts suggest housing remains “relatively affordable” thanks to historically low mortgage rates. But continued strong demand from buyers and persistent low inventory will continue to push prices even higher, according to the report.
Of course, the inventory picture has improved a bit since the spring, with more homes for sale and price growth moderating a bit. But Goldman analysts say this imbalance between supply and demand is expected to continue until next year.

But it is questionable whether demand will remain as strong in the future, given the high prices. About two-thirds, 66%, of respondents to a University of Michigan homebuyer sentiment survey said now is not a good time to buy a home, according to the report. This is the highest since the early 1980s.

But owners today remain “reluctant bulls, who still intend to buy even if they think it’s a bad time,” Goldman analysts wrote.

How many houses can I afford?
Goldman Sachs’ model looked at the supply, demand, affordability, and prices of homes. He predicts that strong demand and tight supply will gradually erode affordability and make homes so expensive that more people will leave the market. This reduced demand will ultimately allow more inventory to be in the market and the imbalance between supply and demand will eventually ease. But not until prices jump another 16% by the end of next year.
In addition to housing prices that continue to rise, rents will also continue to rise, analysts said, and regulatory efforts by the White House, Congress or individual states or municipalities to alleviate the housing shortage may fail. not be enough.

Political wills have disagreed over efforts to relax zoning rules and other regulatory constraints that have slowed housing construction for decades. This is despite economic research that shows such efforts would boost supply and lower house prices and rents, according to the report.

Some of the successful efforts include California’s recent abolition of single-family zoning in the state, which could mean the 60,000 new single-family homes allowed in the state each year could grow into thousands more units, notes The report.

Nationally, the White House plan to use housing funding from the Reconciliation Bill to increase the supply of affordable housing may not have the intended effects if many of the housing subsidies and tax subsidies do offered are reduced.

“As a result, changes at the national level appear unlikely at this time, and limited changes at the national and local level are only a partial step towards reducing the housing shortage,” analysts wrote. Goldman in the report.

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2/ https://www.cnn.com/2021/10/12/homes/us-real-estate-housing-price-growth/index.html

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