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Housing markets tumbling, a signal that a wider recession is coming

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ATLANTA — Colorado and the national housing market are cooling rapidly under the weight of rapidly rising interest rates, exacerbating the economic slowdown in the coming months, multiple real estate experts warn.

“In our view, the economy is in recession,” Robert Dietz, chief economist for the National Association of Home Builders, said in a presentation Tuesday at the National Association of Real Estate Editors in Atlanta.

Dietz said the US economy contracted in the first half but should grow in the third quarter. But that’s a false rebound, and then he’ll drop year-over-year for another three quarters, removing any doubt that a recession is on the way.

Dietz says housing tends to lead the larger economy, slowing down before a recession starts and recovering before it ends. Until then, I don’t see housing recovering.

According to the Mortgage Bankers Association, interest rates for 30-year mortgages are now above 7%, and demand for loans has plummeted. Zillow estimates that the monthly payments a typical U.S. homebuyer faces are 75% higher than she was a year ago for the same home.

“We are seeing a lot of buyers hitting affordability barriers,” said Nicole Bachaud, senior economist at Zillow.

According to Zillow, the Denver metropolitan area will need a 29% drop in housing prices to return affordability to pre-pandemic levels.in the meantime There is no such thing as a big drophomeowners should be mentally prepared for lower ratings.

“A price correction is imminent in many markets,” said Chris Burke, vice president of mortgage insights at Veterans United Home Loans.

The rate of decline depends on how much home prices have risen in the last two years and the severity of the recession. Birk says a 10% to 15% correction from peak prices is not out of the question, and he projects closer to 20% if a full-blown recession hits.

The construction sector should not suffer the devastation seen during the Great Recession when builders continued to add inventory to an oversupplied market. For example, single-family home starts are expected to fall 14% this year.

Demand for remodeling remains strong, driven by homebuyers spending more time working from home and reluctance to move given how low current mortgage rates are.

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