DMAR August 2022 Recession Red Flags Have Been Drawn

A recession is always coming, it’s just a matter of time.  It’s purely the nature of a cyclical economy. “Are we in a recession” searches continue to hit record levels on Google, and talk of a housing recession has some counting on the bubble to burst.  With more inventory and all other numbers lower across the board, it’s starting to look like a recession, or, maybe it’s just the slowdown we’ve all been hoping for.

A recession does not equal a housing bubble.  While there will be layoffs, slowed production, and a softening in consumer spending, Americans are coming into this recession with $2 trillion in savings and twice the home equity there was in 2006. Colorado is also protected by having 38% of homes owned free and clear, only 1.7% of mortgaged homes delinquent, and a current foreclosure rate of 0.1%.  If home prices continue to slow, as I expect they could during the second half of 2022, recent buyers might lose a little value, some homeowners might even need to sell quickly, but most will simply not sell.  Knowing that as rates drop, as they consistently do during recessions, pent-up demand will reengage with our limited supply, forcing multiple bids and yet again higher prices. 

Institutions, first-time home buyers, and those who have been waiting will all be ready to buy on these dips. And since we have not yet achieved an inventory level that could comfortably sustain a surge in demand, the thought of a housing bubble eludes me.