How Americans Feel About a Potential Housing Market Crash

The housing market has been teetering on the edge of a crash amidst a plethora of challenges, and consumers have begun to take notice on how much risk there is of a crash in 2024. In fact, 44% of Americans think the housing market is at risk of crashing in the next year, according to a new report from LendingTree.

LendingTree’s new survey of over 2,000 U.S. consumers looked at their opinions surrounding the potential of a housing market crash in 2024. The report found that many non-homeowners believe that a crash is the only way they could afford a home, and that 35% of Americans want the market to crash.

Key highlights:

• Most Americans aren’t optimistic about the housing market, with some hoping for a downturn. 44% of Americans think the housing market is at risk of crashing in the next year, with another 31% unsure. 
• What’s more alarming is that 36% of homeowners and 35% of Americans overall want the market to crash. And while 51% of homeowners don’t want the market to burst, 15% of them say they want a crash to lower their property taxes and 15% believe it would lead to future stability.
• Nearly a third of nonhomeowners think a crash is their only way to own a home. 32% of nonhomeowners believe this, but that rises to 39% among Gen Zers and 38% among millennials who don’t own. 
• Mortgage interest rates aren’t helping: Across all Americans, 53% are worried they’ll remain high. Separately, 79% expect rates to rise for at least another year. Looking ahead, 27% believe mortgage rates will be 8.00% or higher one year from now.
• Those who have a locked-in low rate may be stuck in their homes. Half (50%) of homeowners say their current rate is keeping them in their houses. 
• In addition, three-fourths (75%) of Americans are unsure if they’ll ever see rates as low as in 2020 and 2021, and 11% of homeowners don’t think they’ll ever be able to buy a home again.
• Whether you rent or own, home prices and values are top of mind—for opposite reasons. When asked about their biggest housing market worries, nonhomeowners cite high home prices (48%), while homeowners cite decreasing home values (38%). 
• All in all, though, 62% of Americans think home prices will increase in the next year, with two-thirds (66%) of them believing they’ll rise by 5% or more.

Major takeaway:

LendingTree senior economist Jacob Channel stated that he isn’t surprised that so many people want the market to crash, but he’s also skeptical about whether they know what it would mean.

“Right now, home prices are high, as are mortgage rates,” he said. “With that in mind, I can understand why some might wish for a housing crash that brings lower prices. Unfortunately, if the national housing market were to crash, odds are that it would bring down the rest of the economy with it.”

While it’s difficult to predict what mortgage rates will look like in the future, Channel said there’s reason to believe rates will go down next year.

“Across the board, interest rates have risen dramatically since the start of 2022, and mortgage rates are no exception,” he said. “Fortunately, just because rates have risen over the last two years doesn’t mean they’ll continue to climb in 2024. On the contrary, there are encouraging signs, like cooling inflation, that could help bring down rates next year. If inflation continues to cool and the Fed starts cutting rates in 2024 (as they appear poised to do), rates should fall. They won’t plummet, but they might end up closer to 6.00% or 7.00% than 8.00% or higher.”

However, there’s no guarantee. For example, Channel explained that if inflation starts to get noticeably worse again or if bond yields remain elevated, mortgage rates could stay high for some time.

“Ultimately, mortgage rates are constantly fluctuating, and it can be hard to gauge where they’ll end up a week from now, let alone a year into the future,” Channel said. “That said, there’s no reason to assume rates will stay high forever, and there are signs that suggest that they’ll start to come down (albeit slowly) over the next year.”

Although it’s difficult to say what the future holds, Channel says consumers are right to believe seeing low rates again is unlikely.

“There’s a chance that they could fall back to their 2020 and 2021 levels again at some point, just as there’s a chance they’ll spike back up to their early 1980s levels,” he said. “From where things stand, I’d say that either scenario is more unlikely than not.”

While Channel believes rates will come down over the next few years, he said he’d be genuinely shocked if they fall to their height-of-the-pandemic record lows: “Unless something catastrophic—like another major pandemic or a meteor crashing into Manhattan—I think people are right to assume rates aren’t going to fall to sub-3.00% levels anytime soon, if ever.”

For the full report, click here.