Researchers at the investment banking giant Goldman Sachs predict the U.S. housing market will close out 2022 on a low note, with dramatic drops in home sales and price growth.

But it won’t stop there. Next year will be worse.

Housing market predictions: In a research paper titled “Housing Downturn: Further to Fall,” published Tuesday for clients, Goldman Sachs economists predict even further declines in 2023.

“We expect home price growth to stall completely, averaging 0% in 2023,” Goldman said, according to Bloomberg.

But they don’t predict a dramatic free fall.

“While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely.”

In 2024, however, the housing market may begin to bounce back.

The forecast comes as homebuyers back out of the housing market amid higher interest rates. It’s a dramatic shift from more than two years of runaway demand after the COVID-19 pandemic sent the national market into a frenzy, thanks both to low borrowing rates and newfound flexibility from an explosion in remote work.

The pandemic housing rush had an outsized impact in the West, especially growing states like Idaho and Utah that offered more space and larger houses at a relatively lower price point than big cities in states like New York and California.

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Goldman’s forecast also comes just days after the Federal Reserve Chairman Jerome Powell, in the Fed’s continued war against inflation, warned investors interest rates will be ticking up even higher.

“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

The Fed board is set to meet in late September and is likely to follow up the .75% increases imposed in June and July — the biggest series of interest rate hikes in decades — with another .5% to .75% bump.

Powell says ‘some pain’ ahead for consumers, signals Fed will continue aggressive rate hikes

By the numbers: Goldman Sachs forecasts the U.S. housing market activity will close out 2022 down across the board, with a 22% drop in new home sales, a 17% drop in existing home sales and an 8.9% drop in housing GDP, Fortune reported.

In 2023, Goldman Sachs forecasts even deeper declines to home sales, predicting another 8% drop. For existing home sales, researchers predict they’ll drop another 14%, and housing GDP will drop another 9.2%.

However, Goldman Sachs doesn’t predict prices to fall in 2023. While researchers do predict home price growth to decelerate significantly, they also still expect price growth to stay in the green — though just barely. They predict home prices will rise just 1.8% in 2023.

That’s in line with forecasts from the Mortgage Bankers AssociationFannie MaeFreddie MacCoreLogic and Zillow, which also predict home prices will rise in the single-digits, Fortune noted. Moody’s Analytics predicts some more significant price declines in certain areas, particularly “overvalued” areas like Boise, Idaho.

In 2024, however, Goldman Sachs forecasts tides will change, predicting home price growth will tick up to 3.5% in 2024 and 3.8% in 2025.

This ‘overvalued’ Western city could see home prices fall up to 20% if recession hits

Is the housing market crashing? No, though the housing market has entered a recession in terms of sales and tempered demand, it’s still a far cry from what we saw in 2006, when a housing bubble — propped up by risky bank lending practices that fueled synthetic demand — popped.

Today, experts note demand nationwide is real. The nation continues to face a housing shortage. Americans want to buy homes, but higher mortgage rates have priced many out or turned many away from wanting to navigate the market at this time.

Goldman Sachs explains why today’s housing market, though it’s in downturn, isn’t in the same place:

“Past housing downturns have typically been accompanied by economy wide recessions, which led to an influx of housing supply as unemployment rose and individuals were forced to sell their homes (this was especially the case in the financial crisis). However, an influx of supply from this channel seems unlikely this cycle: the labor market remains robust (and likely will, even in a mild recession) and ... household balance sheets are extremely strong and loan delinquency rates are likely to remain historically low,” wrote Goldman Sachs researchers, according to Fortune.