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Existing home sales recession hit so hard that we're back to 1978 levels

Where Goldman Sachs thinks existing home sales—and new home sales—will head through 2027

Are you a housing investor? Do you own a long-term or short-term rental property? 🏠

If so, you’re invited to participate in the ResiClub-Groundfloor Housing Investor Survey.

The survey results will be published later this month in ResiClub—and in other mainstream publications.

The recession in the U.S. existing home sales market has been so deep that we’re back to late ‘70s levels—despite us now living in a much bigger country:

April 1978: 4.09 million U.S. existing home sales print

April 2024: 4.14 million U.S. existing home sales print*

1978: 223 million U.S. population

2024: 341 million U.S. population

The reason, of course, is that housing affordability has deteriorated so much that many buyers and sellers alike have pulled back from the market. Many homeowners who would otherwise like to sell and buy something else are staying put rather than trading in their 3% mortgage rate for a 7% mortgage rate.

The bad news?

According to a forecast published this week by Goldman Sachs, the recovery for existing home sales could be a slog.

Heading forward, Goldman Sachs expects that existing home sales will slowly drift up from 4.1 million in 2024 to 4.5 million in 2027. Not only is that far below the 6.1 million during the Pandemic Housing Boom in 2021, it’s also well below the 5.3 million U.S. existing home sales during “normal” times in 2019.

While this “recession” for existing home sales has coincided with pricing corrections in some pandemic boomtowns in parts of Texas and the Mountain West, many housing markets in the Northeast and Midwest, where inventory has remained tight, have continued to see rising home prices.

Additionally, the U.S. new home sales market has fared much better than the existing home sales market. For two reasons.

  1. Single-family homebuilders don’t have a “lock-in effect”—they can continue to develop and build new homes

  2. Homebuilders, where needed, have done affordability adjustments like outright home price cuts or mortgage rate buydowns to “find the market” and move product. Many sellers in the existing market have resisted doing so.

Goldman Sachs thinks the average 30-year fixed mortgage rate will fall to 6.5% by the end of 2024, and to 6.3% by the end of 2025.

And analysts at the investment bank forecast that U.S. home prices will rise +3.8% in 2024, followed by +4.4% in 2025.

Here’s Goldman Sachs full economic and housing forecast (2024-2027):

*U.S. existing home sales print = Seasonally adjusted annualized rate. In other words, if we maintain the current pace in April, and seasonality acts normal, we'd do 4.14 million existing home sales over the next 12 months.

ResiClub PRO members got these 3 additional research articles last week: