Goldman is back with a 16-years-later look at the housing market crash of 2008—and finds affordability is even worse right now

Mortgage rates are at their highest levels in more than two decades at nearly 7.5%, and home prices continue to creep upward because of decades of underbuilding and the resultant lack of houses. For the second quarter of 2023, the average sale price in the U.S. hit nearly $500,000, according to the Census Bureau, nearly double the price of homes at the time that the housing bubble burst in 2008.

Roger Ashworth, a managing director at Goldman Sachs, looked at the housing crash that sparked the Great Recession 16 years later, and found most things in a “much stronger position”—with the major exception of affordability.

“While housing and more generally consumer fundamentals are in a much stronger position today, affordability for the incremental buyer is worse than it was at the peak in 2006 before the crash,” he wrote in a credit strategy research paper released Tuesday. “Absent any negative shocks to the broader economy that would either boost excess supply of homes on the market or fuel an uptick in unemployment, we continue to expect home prices to rise at a slow pace.”

The Wall Street bank is far from alone in its withering assessment of housing costs. The Atlanta Fed found that housing affordability has deteriorated beyond 2006 levels in its Home Ownership Affordability Monitor, which tracks factors including median home prices, median income, mortgage rate, monthly principal and interest payments, and the average percentage of income spent on mortgages. As of July 2023, housing affordability had dropped nearly eight percentage points year-over-year—and remains more than 31 percentage points below the threshold considered widely accessible.

By the end of this year, we’ll see home prices rise by 1.8%, with a 3.5% increase by the end of 2024, Ashworth predicted in the paper titled, “U.S. Housing market crash turns not-so-sweet 16.” Ashworth has been studying mortgage-backed securities and the real estate market for more than a decade, most recently with Citi. He joined Goldman in July, according to eFinancialCareers. Ashworth did not respond to Fortune’s request for further comment on the research paper.

Although there’s still reason to be concerned about housing affordability, a lot has changed since 2008, when Fannie Mae and Freddie Mac were placed under conservatorship by the U.S. government—and the major challenges facing the housing market today differ from before.

For one, two decades ago, products like zero-down-payment mortgages and taking out cash from a home’s equity helped more Americans buy property, boosting real estate prices at the time of the last crisis. Today, prices are high because there are much fewer homes for sale. Indeed, housing housing inventory levels are near historic lows. Between September 2018 and September 2023, the average number of homes on the market dropped a whopping 60% to below 700,000 active listings, according to Realtor.com.

“The current low home inventory could help explain why home prices appear to be resilient despite the challenging affordability environment we find ourselves in,” Ashworth wrote. But in the 2004 to 2009 period, home supply started growing while home price appreciation slowed, he noted: “Not only was the months’ supply of homes high, there was also a buildup in ‘shadow’ inventory of homes of borrowers facing foreclosure even before job losses started.” 

Today, we’re seeing mortgage rates and home prices climb in tandem—a brutal storm for would-be homebuyers who find themselves priced out. During the last crash, higher loan payments started to translate into weaker home prices, which isn’t the case today.

“[U]nlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory,” Sam Khater, Freddie Mac’s chief economist, said in a statement released Sept. 29. “These headwinds are causing both buyers and sellers to hold out for better circumstances.”

Unfortunately for those would-be buyers, Ashworth, along with many other real estate economists and experts, doesn’t expect better deals any time soon. Without a boost in home supply, an uptick in unemployment, or a drop in mortgage rates, Goldman holds to its projection that home prices will continue to climb into next year.

“Now that interest rates have reversed course and are now far higher, affordability for the incremental home buyer is more challenged than during the 2004-07 period,” Ashworth wrote. “We continue to expect home prices to rise at a slow pace over the medium term.”