Housing to remain weakest part of economy, falling 8% in the second half, Goldman says

The housing market will hamper economic growth in the second half of the year, according to Goldman Sachs. Residential investment should fall 8% in the back-half of the year compared with the same period a year ago, Jan Hatzius, Goldman’s chief economist, told clients in a Sunday note. Declines in affordability and immigration are among the key causes of weakness in the housing market, he said. “Residential investment is likely to remain the largest drag on growth,” Hatzius wrote. Hatzius said multifamily homebuilding is likely to continue to operate at depressed levels through December. At the same time, the number of new single family homes being started will contract, he said. The economist pointed to two key overhangs for the housing market. A slowdown in immigration is likely to limit household formation in the midst of President Donald Trump’s crackdown on illegal border crossing following his return to the White House earlier this year. Hatzius also cited the rising popularity of mortgage buydowns, when homebuyers purchase “mortgage points” to lower their rates, as evidence of affordability issues. Moreover, any slowdown in the labor market will further hurt housing trends, according to Hatzius. Friday’s nonfarm payroll report indicated such less hiring activity, with the July data coming in below expectations and May and June totals revised sharply lower than originally reported.