The current sentiments and concerns surrounding the housing market crash in the United States have been brought to light by a recent survey conducted by LendingTree. The findings indicate a significant level of apprehension among Americans, with a considerable percentage anticipating a potential housing market crash in the next year.
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Americans Think Housing Market Will Crash in 2024
A Pessimistic Perspective:
44% of Americans Fear Imminent Housing Market Crash
Recent findings from a LendingTree survey of over 2,000 U.S. consumers paint a grim picture of the housing market's future. An alarming 44% of Americans believe that the housing market is at risk of crashing in the next year. What's even more surprising is that 35% of Americans actually hope for a market crash, with some nonhomeowners viewing it as their only chance to afford a home.
Key Findings:
- 44% of Americans anticipate a housing market crash, with another 31% uncertain about the future.
- 36% of homeowners and 35% of Americans overall express a desire for the market to crash, driven by various motivations such as lowering property taxes and believing it could lead to future stability.
- Nearly a third of nonhomeowners (32%) see a market crash as their only pathway to homeownership, a sentiment particularly pronounced among Gen Zers (39%) and millennials (38%).
- Concerns about mortgage interest rates loom large, with 53% of Americans worrying about them remaining high. Additionally, 79% expect rates to rise for at least another year, and 27% believe mortgage rates will soar to 8.00% or higher in the next year.
- Homeownership challenges persist, with 50% of homeowners feeling stuck due to their current low mortgage rates. Furthermore, 75% of Americans are unsure if they'll ever see rates as low as in 2020 and 2021, and 11% of homeowners doubt their ability to buy a home again.
The Divergence of Concerns:
Whether one owns or rents, the issue of home prices and values dominates thoughts, albeit for different reasons. Nonhomeowners are troubled by high home prices (48%), while homeowners are anxious about decreasing home values (38%). Despite these worries, a majority (62%) of Americans believe that home prices will increase in the next year, with two-thirds (66%) expecting a rise of 5% or more.
The Intersection of Anxiety and Aspiration:
Americans' Belief in an Impending Housing Crash
As of October 2023, the housing market has been tumultuous, marked by 30-year mortgage rates reaching nearly 8.00%—the highest since November 2000. This has significantly influenced public opinion, with a substantial 44% of Americans foreseeing a housing market crash in the next year. Millennials, in particular, express the highest concern, with 52% anticipating a crash. Other age groups, such as Gen Zers (48%), Gen Xers (42%), and Baby Boomers (30%), also share varying degrees of apprehension.
Hope Amidst Uncertainty:
While the majority harbors concerns, there is a notable segment (36%) of homeowners who actually wish for a market crash. Motivations behind this desire include a desire to lower property taxes and a belief that a crash could bring about future stability. Surprisingly, 35% of Americans overall share this sentiment, especially prevalent among Gen Zers (53%), millennials (46%), and those with children under 18 (46%). However, baby boomers (18%) and those with children over 18 (22%) are less inclined towards this perspective.
The Economist's Caution:
LendingTree senior economist Jacob Channel cautions against the optimism associated with a housing market crash. While acknowledging the current challenges of high home prices and mortgage rates, Channel points out the potential negative repercussions of a market crash on the broader economy. Drawing parallels to the 2008 housing crisis, he highlights that a crash might not make homeownership more accessible; instead, it could lead to tightened lending standards and widespread job losses.
“It's not impossible for home prices to fall and make a given housing market more affordable,” Channel notes. “It's also not necessarily impossible for the housing market to outright crash next year while the rest of the economy remains relatively okay (though it's very unlikely). But if you're hoping that the housing market will crash and make it easier for you to buy a house, you'll probably be disappointed.
Despite the uncertainties, Channel provides a glimmer of hope for potential homebuyers, emphasizing the importance of considering historical data that indicates the slim likelihood of a housing crash in the next few years. He concludes by underscoring that historical trends show that when the market crashes, it tends to hurt more people than it helps.
The Dilemma of Aspiring Homeowners:
While the specter of a housing market crash looms, for some nonhomeowners, it represents a paradoxical glimmer of hope. Despite the potential consequences, 32% of nonhomeowners believe that a market downturn is their only viable path to homeownership. This sentiment is particularly pronounced among the younger demographic, with 39% of Gen Zers and 38% of millennials without homes expressing this view. Interestingly, it extends beyond age, encompassing those earning $50,000 to $79,999 (41%) and those with children younger than 18 (39%) as the most likely to share this perspective.
Mortgage Rates: A Pervasive Concern
The pervasive concern surrounding mortgage interest rates is palpable, affecting both homeowners and nonhomeowners alike. As of the week of Nov. 9, the average rate for a 30-year fixed mortgage stood at 7.50%, contributing to the unease. 53% of Americans express apprehension that these rates will remain high, reflecting a widespread worry that has varying degrees of intensity across different demographics.
Demographic Dynamics of Concern:
- Those with children younger than 18 (61%), individuals earning $75,000 to $99,999 (60%), and millennials (59%) emerge as the groups most troubled by the prospect of persistently high interest rates.
- Women (56%) demonstrate a higher level of concern compared to men (49%) when it comes to the impact of interest rates on the housing market.
Projections and Expectations:
Looking into the future, 79% of respondents anticipate rates to rise for at least another year, with 53% of this group believing that rates will rise for over a year or longer. Among these expectations, 27% of Americans foresee mortgage rates reaching 8.00% or higher a year from now. Additionally:
- 19% believe rates will be between 5.00% and 5.99%
- 15% anticipate rates between 6.00% and 6.99%
- 13% expect rates between 7.00% and 7.99%
Notably, Gen Zers are the most optimistic age group, with 21% thinking rates will be between 5.00% and 5.99%. In contrast, 21% of baby boomers anticipate rates between 7.00% and 7.99%.
The Economist's Optimistic Outlook:
Despite the prevailing concerns, LendingTree senior economist Jacob Channel provides a glimmer of optimism regarding future mortgage rates. He points out that while rates have risen significantly since the start of 2022, historical trends suggest that this trend may not necessarily continue into 2024. Factors such as cooling inflation and potential rate cuts by the Federal Reserve in 2024 could contribute to a decline in rates. Channel cautiously predicts that rates might end up closer to 6.00% or 7.00% rather than the feared 8.00% or higher.
However, Channel underscores the unpredictability of mortgage rates, acknowledging that various factors, such as a resurgence of inflation or elevated bond yields, could keep rates high. In conclusion, he emphasizes that while rates are in constant flux, there are indications that they might start to decrease, albeit gradually, over the next year.
Expert Tips for Navigating the Uncertain Housing Market:
Preparing for Market Changes:
As the housing market remains dynamic and unpredictable, expert advice becomes invaluable for individuals contemplating buying or selling in the upcoming year. Jacob Channel provides insightful tips to help individuals navigate potential market fluctuations:
1. Don't Rely on a Crash as a Savior:
Channel cautions against banking on a market crash as a solution to high prices. While acknowledging the challenges of the current housing market, he emphasizes that waiting for a crash is not a reliable strategy. According to Channel, the housing market is unlikely to outright crash next year. Instead, he anticipates that prices may adjust in certain regions, and interest rates might also experience fluctuations. To overcome affordability challenges, he advises prospective buyers to focus on practical steps like saving and strengthening finances rather than relying on unpredictable market shifts.
2. Plan Wisely, But Seize Present Opportunities:
Planning is crucial, but not at the expense of the present. Channel suggests that giving oneself ample time to save money, improve credit scores, and pay down debts can facilitate the mortgage approval process. However, he warns against becoming overly fixated on future possibilities, as there might never be an “ideal” time to buy. Channel encourages individuals in a favorable position to buy now, reminding them that great opportunities may be missed if paralyzed by concerns about an uncertain future.
3. Stay Informed About Market Dynamics:
Keeping abreast of market changes is crucial, according to Channel. The housing market is in constant flux, and conditions can vary significantly from one location to another. While not advocating obsessive monitoring, Channel suggests having a general awareness of current mortgage rates and home prices in your area. Recognizing that the market's appearance today may differ tomorrow, staying informed allows individuals to make well-informed decisions, whether buying or selling a house.
This information is based on a survey of over 2,000 U.S. consumers conducted by LendingTree, a leading online lending marketplace. Predicting market trends, including the possibility of a housing market crash, involves uncertainties. Therefore, it is recommended to supplement these insights with additional research and expert opinions for a comprehensive understanding of the real estate landscape in the United States for 2024 and beyond.
