Goldman Sachs Making UnLikely Forecasts About AZ Housing Market
There was a story that ran this week that quotes Goldman Sachs making all kinds of unlikely forecasts. It has created quite a stir and has a lot of people talking. Its description of the current Phoenix market bears little comparison with the real world.
Some quotes are:
Goldman Sachs expects home values to worsen through 2023 amid continued skyrocketing interest rates and declining housing prices
Four US cities will suffer the most catastrophic dips, drawing comparisons to the 2008 housing crash (with Phoenix , AZ being one of them)
Phoenix Arizona will likely see noticeable increase before drastic decreases of more than 25%
As many of our readers know, we rely on the Cromford for insight into the Greater Phoenix housing market. The Cromford® Report provides detailed information to track the history and current status of the Greater Phoenix residential resale market and offers unique insight into its future direction. Tina Tambor with the Cromford has the follwing comments on the Goldman Sachs article :
We saw skyrocketing interest rates in 2Q and 4Q of last year. The idea that interest rates will skyrocket in 2023 seems more than a little far-fetched when the inflation rate is falling. It could happen, but to have this as your base case seems very irresponsible. Here are some of Goldman Sachs recent forecasts of interest rates which conflict with this week's article:
November - mortgage rates will drop to 5% by March and property values will rise 1.8%
December - 6.2% average rate for 2023
January - 6.5% by 2023 year end (not sure how skyrocketing takes place in this context)
No-one has ever been very good at forecasting mortgage interest rates more than a couple of weeks in advance. This
includes the Mortgage Bankers Association and it especially includes Goldman Sachs whose track-record on interest rate
forecasts is extremely poor. This is not saying much because there is no-one who gets them right more than by random
chance. Any time spent listening to people making interest rate forecasts is time you could have spent more
productively.
Is Goldman Sachs really saying Phoenix home prices will go up and then drastically down? Come on now, there is no data that supports that outlook. Just a wild guess?
In the Great Recession, the median price in Phoenix declined from a peak of $265,000 in June 2006 to a low of $109,000 in May 2011. That is a fall of almost 60%.
Please let us not compare 60% with 25%. They are not similar.
Since the peak in May 2022 of $475,000, the median was down to $412,000 by December. This is a fall of 13% so far.
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