In response to the Federal Reserve’s recent announcement of a prolonged interest rate status quo, Goldman Sachs is set to amend its mortgage rate projections, signaling a shift in the trajectory of housing costs in the coming years.
Initially forecasting a year-end 2023 mortgage rate of 6.5% in January, Goldman Sachs now anticipates a higher figure, revising its projection to 7.1%. Looking ahead to 2024, the investment firm expects rates to stabilize at 6.8%. This adjustment reflects the Federal Reserve’s assertion last month that interest rates are slated to remain elevated, potentially seeing further increases within the year.
The correlation between fixed-rate mortgages and the 10-year Treasury yield is pivotal, and Goldman Sachs is recalibrating its Treasury yield outlook to 4.3% for both 2023 and 2024, surpassing prior estimates. This elevation in Treasury yields is attributed to a surge in bond supply stemming from escalating fiscal deficits. The upswing in yields typically translates to a corresponding surge in mortgage rates.
Commencing the year at approximately 6%, mortgage rates have recently surged to a 23-year pinnacle, surpassing 7%, with projections hinting at a possible climb over the 8% threshold in 2023. This sustained elevation in rates has led to a marked downturn in mortgage applications for home purchases, hitting their lowest point since 1995. The Goldman housing team, led by Ashworth, commented, “We are also lowering our 2024 full-year mortgage origination forecast from $1.5 trillion in total origination to $1.35 trillion in origination, expecting additional weakness through both the purchase and refinance channels.”
With no immediate respite on the horizon, the outlook for mortgage originations, applications, and home purchases remains grim. Goldman Sachs’ revised forecast reflects an unwavering trend, suggesting that future rate increments are all but guaranteed. Real estate markets nationwide are grappling with the repercussions of mounting mortgage rates, leaving potential homebuyers and homeowners in a state of financial apprehension. The confluence of decreased affordability and escalating borrowing costs is stifling activity within the housing market, presenting a significant challenge for those seeking to enter or navigate this economic landscape.
As mortgage rates reach unprecedented highs not witnessed in decades, this prevailing trajectory appears poised to persist, further intensifying the strain on prospective homebuyers and existing homeowners alike.
Source: Yahoo Finance
