• Housing affordability will struggle through the rest of this year, Goldman Sachs warned.

• The housing market faces pressure from higher mortgage rates and low inventory.

• Strategists revised their forecast for home prices upwards to reflect a small decline this year.

Housing affordability will struggle for the rest of the year, thanks to high mortgage rates and scarce inventory, according to Goldman Sachs.

The investment bank revised its forecast for home prices to 2.2% decline in 2023, from its previous forecast of a 6.1% drop in prices.

"The tug of war between poor affordability and tight inventory will continue," strategists said in a note on Monday. "While we are cognizant of the tailwind from tight housing supply, we expect affordability will likely stay poor, ultimately pushing prices lower in 2023."

Affordability has largely been impacted by rising mortgage rates, with the average rate on the 30-year fixed mortgage just surpassing 7% for the first time since March and hovering close to 20-year highs.

Higher costs of borrowing have also weighed on inventory. Existing homeowners are reluctant to sell properties they financed when rates were lower, keeping supply scarce and affordability constrained.

At this point, there are only four large housing markets in the US that are considered affordable, Goldman Sachs estimated, and industry experts say affordability is unlikely to get much better until markets see a pullback in mortgage rates. But rates are unlikely to come down soon, as real interest rates in the economy are close to a 15-year record, according to Federal Reserve data.

Goldman strategists predicted that the 30-year fixed mortgage rate would dip only slightly, to 6.4% by the end of the year, sticking close to two-decade highs.

The cost of borrowing for prospective homebuyers has climbed over the past year, influenced by the Fed raising interest rates to combat inflation. The target range for Fed funds rate is the highest since 2007.

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