Goldman Sachs Research forecasts existing home sales will slip and price growth will remain below 1% next year
Rising mortgage rates are on track to overwhelm the US housing shortage in 2027, suppressing both home sales and new construction, according to Goldman Sachs Research.
Economists Ronnie Walker and David Mericle at Goldman Sachs Research project that existing home sales will total just 3.9 million next year, down from an estimated 4 million in 2026 and 26% below 2019 levels.
Home price growth is expected to slow to 0.8% December-over-December in 2027, following 1.1% in 2026.
“In 2027, we expect the headwind from affordability to increasingly dominate, weighing further on activity,” Walker and Mericle write.
The lock-in effect tightens its grip
More than 95% of US mortgage borrowers currently hold interest rates below prevailing market levels, and 65% carry rates at least two percentage points below today’s benchmark, a penalty that has effectively frozen the supply of existing homes.
Pandemic-era loans now account for a record 42.8% of all outstanding US mortgages, keeping the lock-in effect’s grip on housing supply firmly in place.
“The combination of mortgage borrowers refinancing at low rates en masse in 2020 and 2021 and the high current level of mortgage rates has created a significant financial cost to moving,” Walker and Mericle write.
Mortgage rates have eased from recent highs, and Kristin O'Neil of Open Door Lending says buyers may have more financing options available than they realize, including seller concessions and rate buydowns. https://t.co/HCOntlhwqa
— Mortgage Professional America Magazine (@MPAMagazineUS) October 29, 2026
Michael A. Harris, president and CEO of United Mortgage Corporation of America, told Mortgage Professional America that the rate lock-in is shaping client behavior in ways that may not serve long-term financial goals.
“Rate lock-in continues to influence homeowner decisions, particularly among borrowers who secured mortgage rates below 4%,” Harris said.
“The challenge is that the decision is often being made based on the interest rate alone, rather than the homeowner’s complete financial picture.”
With mortgage rates above 7% in October, Harris was direct: “A low interest rate is valuable, but it should not become a financial or personal trap. The best mortgage decision is not always the one with the lowest interest rate. It is the one that best supports the borrower’s overall financial goals.”
The 30-year fixed-rate mortgage stood at 7.32% as of October 22. Goldman Sachs Research expects rates to ease to around 6.4% by the end of 2027, but affordability would still sit at historically strained levels.
Cotality chief economist Dr. Selma Hepp previously cautioned that even a rate decline may prove insufficient to unlock the market.
“The risk for housing is that affordability remains trapped: rates may ease only gradually while prices stay elevated due to limited supply,” Hepp said.
Fannie Mae and the MBA see a leaner pipeline ahead
Fannie Mae’s Economic and Strategic Research (ESR) Group sharply revised its 2027 mortgage rate outlook upward, now projecting the 30-year fixed rate will hold at 7.5% throughout all four quarters of 2027, up from a previous forecast of 6.7%.
Fannie Mae also projects home price growth will slow to 0.6% in 2027, while single-family mortgage originations are expected to fall from approximately $2.09 trillion in 2026 to $1.87 trillion in 2027.
Refinance lending is set to shrink from $655 billion to $430 billion, reducing its share of originations from 31% to 23%.
The MBA also expects rates to remain above 7% throughout 2027. Mike Fratantoni, chief economist at the MBA in Washington, DC, explained the dual forces pushing borrowing costs higher at the group’s annual conference in Chicago.
“Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates,” he said.
| Forecast metric | Goldman Sachs Research | Fannie Mae (Oct 2026) | Mortgage Bankers Association (Oct 2026) |
|---|---|---|---|
| 30-yr fixed rate | ~6.4% by end of 2027 | 7.5% all four quarters; revised up from 6.7% | Above 7% throughout 2027; ~7.1% by year-end |
| Existing home sales | 3.9 million 26% below 2019 levels | 4.06 million revised down from 4.22M | Slight dip from 2026 expected |
| Home price growth | 0.8% December-over-December | 0.6% HPI; down from 2.7% in 2026 | Not specified |
| Single-family starts | 0.87 million down from est. 0.90M in 2026 | Not specified | Not specified |
| Total originations | Not specified | ~$1.87 trillion down ~11% from $2.09T in 2026 | Falls year-on-year volume cut across all channels |
| Refinance volume | Not specified | $430 billion down from $655B; share falls 31% → 23% | $571 billion down 17% year-on-year |
| Purchase volume | Not specified | ~$1.43 trillion broadly stable | Slight dip from 2026 |
| Source | Goldman Sachs Research, Oct 2026 — goldmansachs.com | Oct 2026 ESR Group forecast — MPA coverage | MBA Annual Conference, Chicago — MPA coverage |
All figures refer to the 2027 full-year forecast period. “Not specified” denotes metrics not covered in reviewed source materials. HPI = Fannie Mae Home Price Index. Sources: Goldman Sachs Research; Fannie Mae Economic and Strategic Research Group; Mortgage Bankers Association. MPA coverage verified October 2026.
Homebuilding faces further pressure
New home sales have been sliding under the weight of elevated borrowing costs, falling 3% in 2026 against the prior year.
Goldman Sachs Research expects single-family starts to total 0.87 million in 2027, down from an estimated 0.90 million in 2026.
Residential fixed investment – which includes new construction and is a component of gross domestic product – is forecast to contract 2.5% and 4% annualized in the first two quarters of 2027, before recovering to a 1% to 2% growth pace in the second half of the year as borrowing costs ease.
High mortgage rates are set to keep US housing activity subdued, with Goldman Sachs Research also flagging reduced immigration as a drag on household formation.
Adjustable-rate mortgages – representing less than 10% of all outstanding US mortgages – are unlikely to materially accelerate the lock-in effect’s natural decay.
Beyond 2027, Goldman Sachs Research expects home sales to gradually edge higher as borrowers pay down their mortgages over time.
“We expect housing demand to remain tepid,” Walker and Mericle conclude.
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