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Competing Forecasts – Clash of the Economic Titans
By the end of 2022, home prices in America will have risen another 16%. That’s at least the forecast by a team of Goldman Sachs economists.
The Goldman Sachs forecast is something of an outlier. Zillow’s most recent forecast model is the closest to Goldman’s; Zillow economists project an 11% increase in home prices in the 12 months ending in August 2022. But over the coming year, as we reported last week, CoreLogic forecasts only a 2.2% jump in U.S. home prices. And for the full 2022 calendar year, Freddie Mac and John Burns Real Estate Consulting are forecasting home price growth of 5.3% and 4%, respectively. So why is Goldman Sachs so convinced that prices – which are currently up 20% from the year prior – will keep soaring when others expect a slowdown?
In a sense, the economists at the investment bank say it’s still all about supply and demand. And politics. "The supply-demand picture that has been the basis for our call for a multi-year boom in home prices remains intact,” they wrote in a note. “Housing inventories remain historically tight, and surveys of home buying intentions remain at healthy levels.”The Goldman economists continued: “Economic research shows that relaxing the zoning rules and other regulatory constraints that have impeded homebuilding for decades would boost supply and lower prices and rents. But in practice, this has been difficult politically.” Across America, there are countless examples of homeowners and local politicians stifling development. The Biden administration has made eliminating exclusionary zoning a core tenet
of its housing agenda, but it’s a hairy issue that’s very local. I don’t see it being solved anytime soon, which means builders will continue to buy land and build where they can – increasingly, that’s the exurbs.
