It’s a rough housing market, and Goldman Sachs expects it to get worse

The U.S. housing market has been stuck in neutral for roughly three years, with housing starts and existing-home transactions essentially flat and mortgage rates holding above 7%. Goldman Sachs expects conditions to deteriorate further rather than improve, suggesting the affordability squeeze that has defined the market may have room to run.

The core dynamic is familiar: elevated borrowing costs discourage would-be buyers and lock in existing homeowners who financed at lower rates, keeping inventory scarce and transactions subdued. When sales volumes stagnate, related activity — from homebuilding to lending to household goods spending — tends to soften as well, which is why housing is watched as a leading indicator for the broader economy.

For market observers, the key question is what breaks the standoff. Watch the trajectory of mortgage rates, any shift in housing starts and builder sentiment, and whether inventory levels begin to loosen. A sustained move in rates could revive activity; continued stagnation, by contrast, would reinforce Goldman's more cautious outlook and keep housing a drag rather than a driver of growth.