Goldman Sachs Warns of Worsening US Housing Affordability Crisis Through 2027

The US housing market faces a prolonged period of difficulty, with Goldman Sachs economists predicting that affordability challenges will persist and potentially worsen through 2027. High mortgage rates, currently above 7 percent, coupled with a significant "mortgage lock-in effect," are expected to continue depressing existing-home sales and making it harder for buyers, especially younger ones, to enter the market.

Economist Ronnie Walker of Goldman Sachs noted that mortgage rates have climbed nearly 1.5 percentage points since February. A substantial portion of existing homeowners, approximately 60 percent, have secured mortgage rates below current market levels, with about 65 percent paying at least two percentage points less. This disparity incentivizes homeowners to remain in their current properties rather than sell and purchase a new home at a higher borrowing cost, thereby reducing the supply of available homes.

Goldman Sachs forecasts existing-home sales to reach just 3.9 million in 2027, a figure slightly below its 2026 projection and approximately 26 percent lower than pre-pandemic levels in 2019. This reduced transaction volume is attributed to the increased financial cost of moving, which involves prepaying an existing mortgage and taking out a new one at a substantially higher rate.

Real estate professionals are observing these trends firsthand. Nashville-based agent Jake Kennedy reported a significant drop in open house traffic and mortgage applications, describing the local market as "grinding to a halt." He recounted an open house for a new listing priced nearly $100,000 below the city's average that attracted no potential buyers, a stark contrast to the interest seen just six to eight weeks prior.

This slowdown is impacting the market across various segments, though Kennedy noted that the squeeze is felt most acutely in the middle and lower ends of the market, while luxury real estate shows more resilience. However, the more affordable segments constitute the majority of the housing market.

Jonathan Carcone, Principal of 4 Brothers Buy Houses, anticipates a continued standoff between buyers and sellers into 2027, with the market remaining flat or experiencing a slight dip rather than a significant crash. He expects fewer deals to close and more price and term negotiations, compelling sellers to price properties realistically. Carcone also suggested that homeowners with strong cash flow might opt for renovations over moving to avoid higher mortgage rates.

Beyond the limited supply, buyer reluctance is also a significant factor. While demographic trends and income growth expectations could theoretically support demand, survey-based measures of purchase intentions have declined. Reduced immigration is also projected to impact household formation, further weighing on housing demand.

The outlook is particularly challenging for younger Americans aspiring to homeownership. According to a Pew Research Center survey, roughly nine in 10 adults under 40 find it more difficult to buy a home today compared to their parents' generation. Between 2019 and 2024, inflation-adjusted median home values increased by 30 percent, while the inflation-adjusted median household income for those under 40 rose by only 9 percent, widening the affordability gap.

Kennedy expressed concern that this persistent affordability crisis could lead to a generation perpetually unable to achieve homeownership, despite efforts to build careers and save money. The keys to a first home, he observed, are slipping further out of reach for many.