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High mortgage rates are expected to weigh on US home sales and slow house price growth to less than 1 per cent in 2027, as rising borrowing costs continue to hurt affordability despite a longstanding housing shortage, according to a report by Goldman Sachs Research.
In its report titled The Outlook for US Housing in 2027 amid Rising Mortgage Rates, Goldman Sachs projected existing home sales to decline to 3.9 million in 2027 from an estimated 4 million in 2026, remaining 26 per cent below 2019 levels. "In 2027, we expect the headwind from affordability to increasingly dominate, weighing further on activity," Goldman Sachs economists Ronnie Walker and David Mericle said in the report. The investment bank also expects US home price growth to slow to just 0.8 per cent in 2027, compared with 1.1 per cent projected for 2026 and 1.2 per cent in 2025. The report described the expected pace of house price growth as "anemic", reflecting continued weakness in housing demand. According to Goldman Sachs, the average rate on 30-year US mortgages climbed to 7.32 per cent as of October 22, 2026, making home purchases more expensive and discouraging existing homeowners from selling. More than 95 per cent of mortgage borrowers currently have interest rates below prevailing market rates, while 65 per cent have rates at least two percentage points lower. This has created a situation where homeowners are reluctant to move because purchasing another property would require taking a new mortgage at significantly higher rates. "The combination of mortgage borrowers refinancing at low rates en masse in 2020 and 2021 and the high current level of mortgage rates has created a significant financial cost to moving," the economists said. The slowdown is also expected to affect construction, with single-family housing starts projected to decline to 870,000 in 2027 from an estimated 900,000 in 2026. However, Goldman Sachs expects mortgage rates to ease to around 6.4 per cent in 2027, potentially supporting a gradual recovery in housing activity during the second half of the year. Despite the expected improvement, the report cautioned that affordability would remain historically weak. "We expect housing demand to remain tepid," the economists said. (ANI)
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