Tuesday, 4 September 2007

Goldman Sachs housing forecasts

Last week Calculated Risk ran excerpts from a Goldman Sachs research note on housing. From Goldman's forecasts it appears they are not seeing a bottom in housing anytime soon. More specifically Goldman see home price declines of 7% in 2007 and a further 7% in 2008.

As shown below (forecasts are in red) GS expect new home sales to bottom around 1Q08 - 2Q08 at around 650,000. That's about 25% below the latest numbers for July of 870,000.

GS sees Existing Home Sales bottoming in 3Q08 at a seasonally adjusted rate of 4.9 million. Existing home sales for July were 5.75 million implying a 15% decline from the current rate before we see the bottom.

Whilst a 25% decline in new home sales from current levels may seem steep, given what we know about the amount of ARM resets yet to come it's not too hard to imagine. GS figures may prove to be optimistic as some homebuilders did not see a turnaround in the housing market until 2009.

Baring more than the token intervention from the government announced last Friday US housing is in for a lot more pain before any gain.