by Calculated Risk on 6/15/2018 05:51:00 PM
Friday, June 15, 2018
This is an interesting note today from Goldman Sachs economists Daan Struyven and Marty Young: Upside Risk to Home Prices (A few excerpts):
Home prices are growing at a 6.5% annual rate, the fastest pace since 2013. ... we review trends in housing demand, supply, and financing fundamentals and analyze their importance using city-level data.CR Note: It is important to note that this is an "upside risk" to Goldman's fairly low 3% forecast for 2018. My view was house prices would slow this year to the low-to-mid single digit range from the 6.2% annual gain in 2016 (Case-Shiller National Index). That was based on more inventory (it appears inventory has bottomed at a low level) and a little headwind from higher mortgage rates and tax changes.
On the demand side, we find that home prices are rising most rapidly in the strongest regional labor markets and we think a firm national job market will continue to be a tailwind. On the supply side, price growth is higher in the lowest vacancy markets and we expect national supply to remain constrained. On the financing side, we expect only a limited impact on home prices from higher interest rates—which mostly reflect strong growth—in the near term and find little evidence of a drag from reduced tax benefits of homeownership.
... Overall, we see the risks to our 3% home price growth forecast over the next year as skewed to the upside.
Posted by Calculated Risk on 6/15/2018 05:51:00 PM