PHOENIX, AZ. - Residents of Phoenix, Arizona, may soon feel the effects of falling home prices due to the rising interest rates. Goldman Sachs has forecasted that Phoenix and three other American cities, in particular, should expect a decline of more than 25% in home prices by 2023. This decline would rival the Great Recession when home prices across the United States fell around 27%.
The leading cause for this decline is an increase in mortgage rates, which have skyrocketed from 3% to 6% in 2022. This has caused a second significant housing correction since World War II and is expected to continue until year-end 2023. Such a drastic rise in mortgage rates has decreased potential buyers looking to purchase homes, causing further deflation in the U.S. housing market.
Phoenix is considered one of the most affected cities due to its detached state from fundamentals during the pandemic housing boom. According to Goldman Sachs' revised forecast, Phoenix could experience peak-to-trough declines of over 25%. These large drops present a localized risk for mortgages originating in late 2021 or 2022 and higher delinquencies for homeowners experiencing financial hardship during these uncertain times.
The declining trend does not end with just Phoenix; many other cities throughout the Southwest and Pacific Coast will also experience similar drops in their housing markets. San Jose, California; Austin, Texas; and San Diego, California are expected to see similar percentage declines as well - all four cities will likely face a boom-and-bust cycle which can create difficult living conditions for many families and individuals who are already struggling financially amidst this global crisis.
In order to prepare for such drastic changes in Phoenix's housing market, residents should consider refinancing their current mortgages or look into alternative options, such as renting out their property instead of selling it on the market where prices are low at the moment.
It is essential to understand your financial situation thoroughly before making any big decisions regarding real estate investments during times like these - consulting an experienced professional could help you make more informed decisions that work best for you and your family's needs and goals.
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