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Goldman Sachs Calling House Market Overpriced By 20-40%

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U.S. housing overvalued by about 20%, Goldman Sachs says
U.S. housing is overvalued by about 20%
, based on historic relationships between monthly mortgage payments and median household incomes, Goldman Sachs (NYSE: GS - news) chief economist Jan Hatzius said Tuesday. 'This overvaluation could eventually be unwound via a period of unchanged home prices with incomes rising,' Hatzius said.
Or it could be unwound by prices plunging, or interest rates falling enough to make houses affordable.
Hatzius found considerable regional variation, with housing in California and other
hot markets overvalued by as much as 30% to 40%
, while homes are fairly valued in much of the rest of the country, including Atlanta, Texas and Cleveland. The deterioration in housing is one reason Goldman predicts the Federal Reserve will stop raising rates at 5%.

Based on GS's criterea, the UK would be a "hot market" (our HPI is roughly 3 X the overall US rate in the past 5 years) where prices will unwind in the form of a "plunge" as IR are going nowhere but up (or, sterling tanks).

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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