According to a new report by investment bank Goldman Sachs, both the San Diego and San Jose housing markets are likely to see massive declines housing prices this year, with 25% decreases predicted and prices likely to be similar to where they were during the Great Recession in the late 2000’s.
Housing prices have been going down in several markets across the state. While cities, such as San Francisco have attributed this to population losses in recent years and the market acting accordingly, other housing markets that have been hotter are expected to see a larger loss due to a combination of economic worries, oversaturated markets, and interest rates cooling down buyers.
In addition to San Diego and San Jose, Goldman Sachs said that Phoenix and Austin are also likely going to see housing prices crash. According to a report last year by CoreLogic, San Diego average home prices had already fallen by about $100,000, meaning that it could become even worse this year.
“This national decline should be small enough as to avoid broad mortgage credit stress, with a sharp increase in foreclosures nationwide seeming unlikely,” Goldman Sachs reported this week. “That said, overheated housing markets in the Southwest and Pacific coast, such as San Jose MSA, Austin MSA, Phoenix MSA, and San Diego MSA will likely grapple with peak-to-trough declines of over 25%, presenting localized risk of higher delinquencies for mortgages originated in 2022 or late 2021.”
While some Californian cities such as Los Angeles are expected to retain a strong housing market, cities such as New York, Chicago, and Miami due to continued demand, the named markets, as well as others facing larger declines in Texas, California, and elsewhere, could have an impact on home buying.
“I wouldn’t say that no one will buy, especially with rate adjustments,”said Estella Gomez, a realtor in San Diego. “We’re still seeing a lot of homes come on the market, and people willing to buy. It’s just that people are being more choosy now, or rather, they can afford to be more choosy and negotiate better deals. It’s not like during the pandemic when houses were snapped up in a matter of days.”
“And of course, California still has housing markets in LA, the Inland Empire, Stockton, Sacramento, and other places where it is staying strong. But in San Diego, houses are staying on the market for longer. I have colleagues in Austin who are saying the same thing. People are still buying just fine, it is just more choosy right now. It’s not like San Francisco five years ago where a shack could go for a million dollars.”
Despite confidence from realtors, Goldman Sachs stressed that interest rates remaining high for longer than initially tracked for could keep mortgage rates higher than average, with markets seeing a decline.
“I will concede that,” added Gomez. “But we need to keep an eye on the markets and the mortgage rates. We don’t want another 2007 to befall the housing market. And realtor who was part of it then can tell horror stories, especially those who were in Florida during that time. We’re not going to see a street of houses all with for sale signs again, but the way things are looking, yes, things are slowing down somewhat. But it’s not all doom and gloom.”
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