Theses 4 cities will suffer a 2008-like crash in home values

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🚨 U.S. GDP grew 2.9% in Q4, beating economist predictions.

Welcome to the 421 new folks joining us since Monday, and my apologies if you received two emails on Wednesday due to a technical issue. Let's dive in!

1. Mortgage application payments fall 2.9%

The national median payment applied for by home buyers decreased 2.9% to $1,920 in December 2022 from $1,977 in November, according to the MBA.

This means that home affordability improved last month as mortgage rates fell by 37 basis points. However, the median purchase application payment amount last month increased nearly $3,000 to $300,000.

The MBA expects that mortgage rates and home-price growth will soften, which should help bring more buyers into the market during the spring home-buying season.

2. How home prices are expected to shift according to Goldman Sachs

According to a note to clients, Goldman Sachs predicts that some U.S. housing markets could see plummeting values similar to the 2008 housing collapse in 2023 and 2024.

Highlights from the note;

• Devastating declines in cities where valuations have drifted far from fundamentals, with peak-to-trough declines of over 25% in markets like San Jose, Austin, Phoenix, and San Diego.

• Interest rates will remain high longer than expected, and has raised its forecast for the 30-year fixed mortgage rate to 6.5% for year-end 2023

• Prices in cities like New York and Chicago will fall less than 2%, while others like Baltimore and Miami will grow.

This doesn't look good for some markets, but it is important to note that other experts, such as the NAR Chief Economist Lawrence Yun, have a more optimistic outlook, seeing "hopeful signs" for the country as a whole and expecting housing prices to be flat on average.

3. New home sales end the year with positive momentum, however...

The Census Bureau released a report showing that new single-family homes sold at a seasonally adjusted annual rate of 616,000, 2.3% more than the revised November rate of 602,000.

This is despite the slowing economy and downturn in the housing market. The median sales price of new houses sold in December 2022 was $442,100, while the average sales price was $528,400.

There were 461,000 new homes for sale as of the end of December, but many of them are still under construction or not yet started.

However, it's important to note that about 11% of new homes sold were under $300K in December 2022. This is down from around 80% in 2002. The under $300K bracket is going away due to inflation pushing prices higher.

4. Flagstar Bank makes big cuts to mortgage operation

Michigan-based Flagstar Bank is reducing its retail operations and laying off hundreds of staff after receiving approval for a merger with New York Community Bank.

According to laid-off employees, the layoffs occurred on Thursday morning and were unexpected, with no warning and immediate termination of access to company systems and emails. However, the company offered severance payments based on tenure and job position.

The merger with New York Community Bank was approved in October and November of 2021 and creates one of the largest regional banks in the US, with operations in nine states.

5. More Nuggets

Wells Fargo: Construction appears set to downshift (LINK)

Acquisition of Realtor.com ‘would be a big inroad for CoStar’ (REN)

Better Launches One Day Mortgage For Commitment Letters (NMP)

6. Meme of the day

💬 Quote: "Good marketing can sell once, but only a good product can sell twice. In the long run, your performance reverts to the value you provide."

☀️ See you on Monday!

p.s. If you like this newsletter, your friends may too. Forward it to a friend, and let them know they can subscribe here. Written by Ian M.