Goldman Sachs shares 4 charts that explain the state of the housing market right now — and show why 4 cities could soon see the biggest price declines (2024)

A worst-case scenario supply shock still wouldn't rival that seen during the mid-2000s housing crisis, the bank said in a note last week.

But under the surface of the broader market, things are more complicated. In certain areas of the country, supply levels are rising faster than in others.

In four cities in particular, supply levels are above pre-pandemic levels, the bank said, which will result in greater price declines than the national average. They include: Phoenix, Arizona; San Francisco, California; Seattle, Washington; and Austin, Texas.

"While overall levels of housing inventory remain tighter than pre-pandemic levels, some vulnerable metropolitan areas have seen supply increase rapidly," said strategists Lotfi Karoui, Vinay Viswanathan, and Ronnie Walker. "Unsurprisingly, our home price appreciation forecasts have been most negative for geographies where supply is starting to overwhelm demand; from 2022 Q4 to 2024 Q4, we expect home prices (on repeat sales transactions) to fall by -19% in Austin, TX; -16% in Phoenix, AZ; -15% in San Francisco, CA; and -12% in Seattle, WA."

Supply developments in the multi-family housing market could also signal trouble for prices down the line, the strategists said.

"We think the risk of a potential supply surplus is elevated in the multi-family space. Almost 40% of total housing starts over the past 6 months have been for multi-family units, the largest share in 39 years. While multi-family developments do take longer to execute, this could challenge the medium- to long-term outlook for rental properties."