Goldman Sachs - Don't Hold Your Breath on Rates Dropping
If you’ve been hoping for mortgage rates to finally dip, you might want to sit down for this one. Goldman Sachs just released its latest housing and mortgage outlook, and it’s not exactly what home buyers wanted to hear. According to their updated forecast, those high mortgage rates we've all been grappling with aren’t going anywhere anytime soon.
In fact, Goldman has raised its year-end prediction for 30-year mortgage rates from 6.1% to 6.75%. Currently, the average sits around 6.94%, so it seems we’re going to be flirting with 7% for the rest of the year. That’s tough news for anyone trying to finance a home, especially as affordability continues to scrape the bottom of the barrel.
The main culprit? Rising Treasury yields. Their analysts now expect the 10-year Treasury yield to climb to about 4.5% by year’s end. Since Treasury yields are a major factor in how mortgage rates are set, this upward pressure means it’s unlikely we’ll see any big drop in rates. And even though mortgage-backed security spreads might tighten a bit, it won’t be enough to make a real dent.
Goldman also touched on the broader housing market. Despite challenging affordability, they’re not predicting home prices will fall—at least not nationwide. The supply of homes is still limited, and there’s decent buyer demand from folks who need to move regardless of rates. That said, the firm did lower expectations for home price growth, now forecasting just 3.2% appreciation in 2025. They also pointed out that March saw a rare dip in the Case-Shiller Index, but attributed it in part to tariff uncertainty rather than a true trend.
Pending home sales in April are still being dragged down by these rates, even though more homes are hitting the market. Construction pipelines remain strong, but that hasn’t translated into relief for buyers just yet. And here's a sobering stat: almost half of the homes for sale—amounting to roughly $700 billion—are now sitting on the market longer than expected, going “stale” as sellers outnumber buyers by a margin of about 500,000.
In summary, I’d say this paints a pretty clear picture: unless you’re buying with cash or find a sweet off-market deal, it’s going to be a challenging year. Rates hovering around 7% might not just be a phase—they could be our reality for the foreseeable future. Let’s hope inflation cools and the economy steadies, but for now, patience and flexibility will be key.
Source Inspiration: ZeroHedge.