by Calculated Risk on 11/04/2018 04:03:00 PM

A few brief excerpts from a Goldman Sachs research note today: The Housing Slowdown

The most likely drivers of the slowdown are higher interest rates and tax reform.

CR Note: We discussed these two key headwinds at the beginning of the year. Goldman Sachs economists estimate that two-thirds of the recent slowdown is due to higher interest rates.

We expect higher interest rates and tax reform to remain headwinds, but see the low level of homebuilding relative to demographic trends as a medium-run tailwind.

CR Note: The demographic tail-wind isn't as strong as I thought a few years ago. There have been more prime age deaths, and less immigration. See Tom Lawler's recent article: Lawler: Deaths, Immigration, and “the Demographics”

Our residential investment model accounts for both of these offsetting forces and currently projects a -1.5% growth pace in 2019.

CR Note: So Goldman expects a small decline in residential investment in 2019.

[T]he housing slowdown has added to recession worries. We see such fears as overdone.

CR Note: I agree that recession concerns are overblown.