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The housing market is headed toward a major correction that could lead to modest price drops in the year ahead after whirlwind sales throughout the majority of the COVID-19 pandemic, Insider reports. As mortgage rates near 7% and housing inventory remains tight, Comerica chief economist Bill Adams predicts that real residential investment will drop 18% next year, while sales of new single-family homes could fall 25% to 463,000.

Though home prices are expected to fall by mid-single digits from peak to trough between mid-2022 and mid-2023, popular cities that saw unsustainable growth throughout the pandemic could be hit with even more substantial price drops in the year ahead.

"House price declines will likely be larger in the most unaffordable cities on the West Coast, and smaller in cities that have seen accelerating population growth since the pandemic hit like the Florida metros," Adams said. "The devastation of Hurricane Ian worsened housing scarcity in Florida, which is showing up in smaller house price declines than the rest of the country."

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