Home Sales in 2022 Probably Will Rise to a 16-Year High, Goldman Sachs Says
U.S. home sales are set to rise to a 16-year high in 2022 and prices for real estate likely will gain 9%, Goldman Sachs said in a forecast.
Sales of previously owned homes probably will total 6.41 million this year, the highest since 2006, the investment bank said in a note to clients on Sunday night. That would be a gain of 4.5% from 2021’s 6.13 million sales, according to data from the National Association of Realtors.
The 9% gain in home prices the investment bank is forecasting for 2022 would be almost double the annualized pace projected by other housing forecasters such as NAR, which earlier this month estimated an increase of 5.1%. Last year, home prices gained a record 17%, according to NAR data.
Goldman Sachs' housing projections were included in a larger forecast that focused on economic data such as GDP, inflation, industrial production, government spending, and financial market stability.
"Financial market volatility and sensitivity to economic news have both increased in recent months, and we see more of both in the pipeline – particularly on days with price and wage data," the report said.
Activity in the financial markets impacts mortgage rates – and, therefore, home sales and prices – because most U.S. home loans are packaged into bonds that are sold to investors. When investors demand higher yields on the securities, mortgage rates go up.
While Goldman Sachs' forecast didn't include projections of what mortgage rates would do, it did estimate the future yield on the 10-year Treasury, which is a benchmark for mortgage rates.
The 10-year yield likely will increase to 2.25% by 2022's fourth quarter from 1.52% in 2021's final three months, the forecast said. That 73-basis-point gain signals mortgage rates likely will be nearly three-quarters of a percentage point higher in the fourth quarter, from a year earlier.
That would put the rate at just under 4% by the end of this year, based on the average Freddie Mac 40-year fixed rate for 2021's fourth quarter.
Inflation, which has strained household budgets since last year as the pandemic snarled global supply chains, probably will slow to 4.4% this year from 2021's 7.1%, the highest since the 1980s, the investment bank said.
Real GDP growth, which means the increase in gross domestic product adjusted for inflation, probably will slow to 3.2% this year from 5.7% in 2021, the Goldman Sachs' note said.
"Above-target inflation, slowing growth, and higher levels of the Fed funds rate are all associated with increased data sensitivity, and we expect all three this year," it said.