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Worsening affordability has pushed Americans to the brink, with more than a third of Americans wishing for a housing crash in 2024, according to a LendingTree survey published on Tuesday.
Jacob Channel | Credit: LinkedIn
“Right now, home prices are high, as are mortgage rates,” LendingTree Senior Economist Jacob Channel said in a prepared statement. “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.”
The financial website surveyed more than 2,000 consumers aged 18 to 77 about their sentiments on the housing market. Forty-five percent of respondents said they expect the housing market to crash in 2024, while 31 percent were unsure about the likelihood of a 2008-esque decline. When broken down by age, millennials were the most likely to expect a crash (52 percent), followed by Gen-Zers (48 percent), Gen-Xers (42 percent) and baby boomers (30 percent).
Households with children younger than 18 were more likely to predict a crash (55 percent) than households with children older than 18 (35 percent), and homeowners were more likely to believe in an impending crash (46 percent) than nonhomeowners (46 percent).
Only 25 percent said the market wouldn’t crash over the next 12 months.
For those who see a housing crash on the horizon, the majority aren’t scared.
In fact, 36 percent of homeowners within this contingent said a crash could be a benefit, with 15 percent expecting their property taxes to drop and another 15 percent saying it “could lead to future stability.” Meanwhile, 32 percent of nonhomeowners who foresee a crash say it’s the only way they’ll be able to afford a home — with the expectation that mortgage rates and home prices would fall in the midst of an economic downturn.
“It’s not impossible for home prices to fall and make a given housing market more affordable,” Channel said of Americans’ assumptions. “It’s also not necessarily impossible for the housing market to outright crash next year while the rest of the economy remains relatively OK (though it’s very unlikely).”
While some households could “benefit” from a crash, the LendingTree economist said economic downturns ultimately do more harm than good. While home prices would most likely slide, Channel said banks would also tighten their lending standards — meaning most Americans wouldn’t benefit from improved affordability.
“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,” he said. “Not only does data indicate the odds of a housing crash in the next few years are slim, the past shows that when the market crashes, it tends to hurt more people than it helps.”
“Today’s housing market is far from perfect. It’s prohibitively expensive for many and often tough to navigate,” he added. “That said, there isn’t much reason to think the housing market will outright crash next year … If you want to buy, you should do things like save and work on strengthening your finances instead of hoping for a crash.”
Looking ahead, Channel said mortgage rates will eventually come down, albeit not as fast as Americans want. He said rates will likely settle between the 6 percent and 7 percent range in 2024, if the Federal Reserve’s inflation strategy succeeds. As far as what lies ahead for 2025 and beyond, Channel was hesitant to make a forecast outside of the fact that Americans will never see 2 percent to 3 percent mortgage rates again.
“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,” he said. “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. From where things stand, I’d say that either scenario is more unlikely than not.”
He added, “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 percent levels anytime soon, if ever.”
Although that’s not necessarily welcome news for the 35 percent of nonhomeowners and 37 percent of homeowners who say high mortgage rates are their greatest concern, Channel said not all hope is lost.
“Often, the more time you give yourself to do things like save money, increase your credit score and pay down other debts, the easier getting approved for a mortgage and buying a house can be,” he said. “That said, you don’t want to focus too much on what might happen that you forget about what’s going on.”
“An ‘ideal’ time to buy a house may never come, and if you’re in a good position to buy now, doing so might be a good idea,” he added. “After all, you could miss plenty of great opportunities if you’re too worried about the future to act in the present.”
