Goldman Delivers Sobering Rates Outlook For Homebuyers

A new Goldman Sachs report suggests that mortgage rates will not decrease anytime soon, causing uncertainty among prospective homebuyers. The report revised its year-end forecast for 30-year conforming mortgage rates to 6.75%, up from 6.1%. The current 30-year mortgage rate is around 6.94%. The rise in mortgage rates is primarily due to higher Treasury yields, which are forecast to reach 4.5% by year-end. The market's pricing of the terminal rate is now fair, leaving fiscal expansion and data surprises to drive yields. Tighter MBS spreads may drive marginal relief to mortgage rates, but near-term tightening will be driven by bank demand and excess deposit creation. GSE privatization is unlikely to impact mortgage rates, and rates volatility may eventually move lower if tariff policy risks shrink and labor data emerges intact. However, housing affordability will remain challenging, placing downside risk to the forecast for 3.2% home price appreciation in 2025. Despite this, home price depreciation is not expected at the national level due to limited housing supply and strong structural demand. The report concludes that 7% mortgage rates are shaping up to be the new normal, and housing affordability remains severely strained.