September Data and Goldman Sachs Point to a Bleak 2027 for Housing Market
Pending home sales fell 7.3% in September and 11.3% year over year to a record low, according to the National Association of Realtors.
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There’s no place like home. And there’s no one who can afford to buy one right now.
Data released Tuesday signal that the frozen housing market is in Antarctica territory as mortgage rates north of 7% keep buyers on the sidelines. Pending home sales fell 7.3% in September and 11.3% year over year to a record low, according to the National Association of Realtors. Meanwhile, housing starts, which measure how many new residential constructions have broken ground, fell 5.2% in September and 7.4% year over year, according to the Census Bureau. The figure, which was lower than economists were expecting and brings housing starts to one of their lowest paces since 2020, comes just days after the National Association of Home Builders reported that homebuilders’ confidence in the market has plunged to a 14-year low.
New Year, Old Problems
New year, new housing market? Goldman Sachs doesn’t think so. In a note published Monday, economist Ronnie Walker said that next year the firm expects the headwind from affordability reignited by rising mortgage rates to keep weighing on housing market activity:
- “Sustained higher mortgage rates will continue to have their most pronounced impact on housing turnover, and the recent run-up in rates is likely to push existing home sales lower in the coming months,” Walker said. He added that more than 95% of mortgage borrowers have interest rates below current market rates, and 65% have rates that are two percentage points below market rates. In other words, they’re not likely to move any time soon.
- Come 2027, Walker estimates existing home sales of just 3.9 million, which is 26% below pre-pandemic levels.
Homebuilder Blues: Redfin recently reported that 22% of home sellers with active listings are dropping prices, which is a record high. While homeowners being more motivated to sell could be good news for buyers, it’s causing problems for builders, who are already seeing their profit margins shrink as a result of their price cuts and incentives. Builders like Lennar and KB Home now say they’re facing increased competition from the existing housing market.
