According to Goldman Sachs Research, the trend of cooling housing markets is set to sweep through many big countries around the world. Already cooling in America due to rising interest rates, this trend of decreasing real estate values is expected over time – with predictions ranging from 5% - 10%, 15% for Canada and slightly less than 5% in the UK (in nominal terms), with even larger drops expected when adjusted for inflation.

Economists Struyven and Zhestkova warned that housing has become a significant risk to economic growth in the G-10 countries. They note that rising interest rates, lower predictions of North American economic development, as well as unanticipated home prices have caused their forecasts for this region to take a downturn compared with earlier estimations.

Despite an astonishing jump in both U.S and Canadian housing prices after February 2020, these figures have recently taken a dip. Evidence of this shift can be marked by Canada's 7% drop over the last 6 months alone, with New Zealand following not far behind at 11%. While it is difficult to know how large future impacts may be, recent data suggests that real estate declines could potentially become substantial as we adjust our new economic climate amidst the pandemic.

After a staggering surge in housing prices since February 2020, where U.S house prices rose by 42% and Canadian homes jumped 52%, the recent drop in home values may just be partially mitigating this rapidly escalating market trend. But there are reasons to think the declines could be substantial: despite strong growth in the housing market after February 2020, current trends suggest that prices may now be falling at a considerable rate. In Canada and Sweden alone, house values have dropped by 7% over just six months while New Zealand has seen an even sharper decrease of 11% since then. 

Economists at Goldman Sachs Research have highlighted the potential for the global housing market to decline more than expected. Evidence suggests that prices in Canada and New Zealand may eventually return to their long-term average, while a deterioration of signals from home price momentum and affordability across G10 economies could further complicate matters.

The housing market may experience some turbulence, but it appears well-positioned to weather storms. The relative scarcity of available homes and strong homeowner finances should mitigate any potential damage from a slow down or recession. Moreover, mortgage quality is solid in the U.S., with most mortgages fixed rate - further easing concerns that large waves of forced selling could ensue if economic conditions worsen significantly.

With near-term rate increases expected for a considerable portion of U.K. mortgages, the country may not be as sheltered from rising rates compared to other economies like Germany and the U.S., both of which have relatively smaller shares of mortgage debt relative to GDP than Britain does currently per Goldman Sachs Research estimates.

With mortgage rates on the rise, consumer spending could take a hit in Norway, Australia and New Zealand. With each of these countries having considerable home loan debt with many mortgages requiring resetting within 12 months – their purchasing power may soon be affected.

A growing concern in many developed countries, housing slowdowns due to increasing mortgage rates can prove detrimental to a country's GDP. Such effects are evident through lower residential investment and weakened consumption, as borrowers must grapple with high interest payments that affect their cashflow. 

With mortgage rates at an all-time high, now may be the perfect time for homeowners to consider selling their property. Despite current economic uncertainty, we aren't in a recession yet - making it an opportune time to take advantage of market conditions and make a move on home sales.

To maximize the returns on selling your home, enlisting the expertise of a real estate agent is invaluable. A seasoned professional can ensure you receive an appropriate valuation and attain top market prices for your property.

Contact us at 512-261-1000 or visit www.AustinTexasRealEstate.com to know more.

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