These Metros Will Be the First to See Prices Fall in a Market Correction

Ongoing price hikes initiated by the Federal Reserve have kickstarted the largest home-price correction of the post-WWII era and, according to Fortune, the 2023 housing recession is only going to get worse before it gets better. Goldman Sachs recently lowered its 2023 year-over-year depreciation forecast from -4.1% to -6.1%, representing a 10% peak-to-trough home price decline from June 2022 to the end of this year.

Researchers expect that home prices are already down -4% based on November and December readings, meaning that we’re only halfway through a nationwide price correction, but some markets will be hit with more substantial price drops than others.

In 2023, Goldman Sachs expects double-digit home price declines in major markets like Austin (-15.6), San Francisco (-13.7%), San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%). Those markets are also the very places that the home price correction hit the hardest in the second half of 2022. Indeed, through November, Austin is down 10.4% from its 2022 peak home price.

Why does Goldman Sachs expect the correction to deliver the biggest blow to markets like San Diego and Austin? The investment bank says those markets are "overheated," which implies that home price growth there got too detached from fundamentals during the Pandemic Housing Boom. Being detached from fundamentals packs a particularly hard punch when mortgage rates spike like they did in 2022.

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