Goldman Sachs Research predicts a challenging year for the US housing market in 2027, as rising mortgage rates are expected to outweigh the longstanding housing shortage. Economists Ronnie Walker and David Mericle anticipate that affordability issues will dominate, leading to a decline in both existing home sales and new construction.
The firm forecasts existing home sales to total just 3.9 million in 2027, slightly below their 4 million projection for 2026 and 26% lower than 2019 levels. Home price growth is also expected to remain sluggish, with a modest 0.8% increase December-over-December, following a 1.1% rise in 2026 and 1.2% in 2025.
High borrowing costs are a major factor in housing affordability. This year’s surge in mortgage rates, driven by the Iran War, higher oil prices, and potential Federal Reserve rate hikes, has discouraged homeowners from selling. Over 95% of mortgage borrowers have rates below current market levels, with 65% holding rates two percentage points lower, creating a strong “lock-in” effect that slows sales.
As of October 22, rates for 30-year mortgages in the US have climbed to 7.32%. While Goldman Sachs Research expects mortgage rates to decline in 2027 to 6.4%, affordability will still remain historically poor.