The US housing market has been slowing down in the past few months as interest rates continue to climb. While some may see the housing market downturn as an opportunity to score a deal on their dream home, Goldman Sachs has warned that things are only going to get worse in 2023. For prospective buyers, this doesn’t necessarily mean lower home prices.
“We expect home price growth to stall completely, averaging 0% in 2023,” Goldman strategist and economist Jan Hatzius wrote in a memo to clients. “While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely.”
In Q2, home prices averaged a significantly higher $525K compared to last year’s average of $473K and 2020’s low average of only $374.5k.
Despite forecasts of a minor decline in home values over the next year, rising prices and a restricted inventory of properties are expected to maintain them elevated.
Mortgage Rates are Increasing
For the week ending September 1, Freddie Mac data showed that the average 30-year fixed mortgage rate climbed to 5.66%. This is a significant increase from last year when rates were at 2.88%.
Goldman predicts for the US housing market that new home sales will decline by 22% before the end of the year, existing home sales will drop by 17%, and overall housing GDP will fall by 8.9%.
Goldman projects a 9.2% decrease in housing GDP next year, with these numbers continuing to decline even further in 2023. Despite this predicted decrease in home sales, the Federal Reserve is still maintaining their intention of hiking interest rates as inflation remains an issue.
“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Fed Chairman Jerome Powell said in a speech last month. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
Housing Market Sentiment Index
The Sentiment Index from the Census Bureau reports that feelings among home builders and developers have fallen to its two-year low. Construction is slowing as building costs continue to increase. Americans are breaking their purchase contracts for homes more frequently than since the COVID pandemic started.
Nearly one in five home sellers slashed the asking price for their homes in August in an attempt to lure in buyers.
As the US housing market forecast for 2023 predicts a decrease in housing GDP, real estate fractionalization opportunities will intensify. This is because investors will be looking for ways to make money in the real estate market that are not as risky as buying a property outright.
Fractionalized Real Estate Will Break Through
Fractional ownership of properties allows investors to spread their risk over multiple properties. This can be a more appealing option given the predicted US housing market conditions. Additionally, fractional ownership gives investors the ability to generate income from rental properties without having to deal with the day-to-day management of tenants. This can be appealing to investors who want to remain hands-off but still profit from the real estate market.
Given the US housing market forecast for 2023, BRiX offers investors an opportunity to profit from the real estate market without having to buy a property outright. BRiX allows investors to spread their risk over multiple properties and generate income from rental properties without having to deal with the day-to-day management of tenants. This can be appealing to investors who want to remain hands-off but still profit from the real estate market. As construction slows and building costs continue to increase, fractional ownership of properties will become an increasingly attractive option for those looking to invest in real estate.
The US housing market is expected to decline in 2023, with home prices averaging 0%. This decrease in housing GDP will create opportunities for fractional ownership of properties, as investors look for ways to make money in the real estate market that are not as risky as buying a property outright. Fractional ownership allows investors to spread their risk over multiple properties and generate income from rental properties without having to deal with the day-to-day management of tenants.