Americas dismal housing market to get even worse in 2027, grim forecast predicts

America’s already frozen housing market could be headed for an even deeper chill next year — with Goldman Sachs warning that stubbornly high mortgage rates will keep buyers sidelined and homeowners trapped in their properties.The Wall Street giant predicts just 3.9 million existing homes will change hands in 2027, slightly fewer than this year and a staggering 26% below pre-pandemic levels in 2019, according to a MarketWatch report published Tuesday.The grim outlook comes as mortgage rates have climbed back above 7%, further squeezing would-be buyers already struggling with sky-high home prices.“In 2027, we expect the headwind from affordability to increasingly dominate, weighing further on activity,” Goldman Sachs economist Ronnie Walker wrote in a note to clients Monday.At the heart of the problem is a growing divide between homeowners who secured rock-bottom mortgage rates during the pandemic — and even earlier — and prospective buyers now facing dramatically higher borrowing costs.More than 95% of existing mortgage borrowers have interest rates below current market levels, while 65% have rates at least 2 percentage points lower, according to Goldman Sachs.That means millions of Americans have little financial incentive to sell their homes, since moving would likely mean trading an affordable mortgage for a significantly more expensive one.The phenomenon, known as the mortgage-rate lock-in effect, has helped keep the housing market in a deep freeze even as demand from prospective buyers remains constrained by affordability challenges.Mortgage rates have surged nearly 1.5 percentage points since their February lows, making the prospect of moving even less appealing.And while the number of homes available for sale has improved, inventory remains historically tight, according to Goldman Sachs.There are some bright spots, including favorable demographic trends and expectations that wage growth will outpace inflation.But those positives may not be enough ...