The housing market will deteriorate more quickly as the impact of soaring mortgage rates hasn't been fully felt yet, Goldman Sachs says

• The housing market will continue to slide in the coming months, according to Goldman Sachs.
• Analysts said September existing homes sales data didn't fully capture the latest increase in mortgage rates.

The housing market is in for more pain as mortgage rates continue to soar, according to analysts at Goldman Sachs.

The warning comes after the existing-home sales report on Thursday showed a 1.5% decline in September to a seasonally adjusted annualized rate of 4.71 million units. That marked the eighth consecutive drop and the longest such slump since 2007.

"While existing home sales declined less rapidly than earlier in the year and home prices increased sequentially, we expect the deterioration in the housing market to reaccelerate in future prints," Goldman Sachs said in a note Thursday.

Analysts pointed to a lag in the sales data that hasn't yet accounted for the recent surge in mortgage rates, which are now near 7% for 30-year fixed mortgages.

That's because existing home sales aren't accounted for until a deal is finalized, which normally happens anywhere from one to three months after contracts are inked.

But since the start of August, mortgage rates have jumped by roughly 2 percentage points, meaning September home sales data likely didn't reflect the increase in borrowing costs.

Goldman also noted the disconnect between housing supply and demand remained "severe" last month, although it slightly improved with the inventory of existing homes available for sale increasing to 3.0 months' worth of supply from 2.9 months. But that is still well below the 2019 average of 3.9 months.

The housing market has been setting off more alarm bells lately. Pantheon Macroeconomics said Thursday the crash has yet to find a bottom, setting up home prices for a dive of up to 20% in the year ahead.

And last week, Wharton professor Jeremy Siegel said he expected home prices to see the second-worst decline since World War II amid aggressive Fed rate hikes.