A housing crash is coming, many consumers believe

A significant share of Americans — 41% — believe the housing market is headed for a crash in the next 12 months and three-quarters of those think it will be worse than the 2008 downturn, a LendingTree survey found.

Among those predicting a crash, 33% said inflation will be the biggest driver, followed by 24% citing high interest rates and 16% feeling that the lack of affordable housing would be the cause. Another 11% think rising home prices will drive that outcome.

The viewpoints of the 2,033 respondents to the October survey were much different than that of Jacob Channel, LendingTree senior economist.

"While I do think the housing market will continue to slow over the next 12 months and some people may end up underwater on their mortgages as a result, a major crash doesn't appear likely — at least not at the moment," Channel said in a blog post.

Channel's opinion matches those of other housing experts who spoke recently at Information Management Network's Residential Mortgage Servicing Rights conference.

While prices are likely to drop in 2023, "as of now, 5% to 10% declines in many markets seem reasonable to me," Channel said. 

But 25% of those surveyed don't think the housing market is headed for a crash in 2023, with 34% responding "I don't know."

Among those who said they didn't expect the market to crash next year, 22% think that it could still happen in the next two to three years. But 16% think the market won't crash because the supply and/or demand isn't in place, 15% believe the measures being taken to prevent inflation from getting worse will prevent a crash and 13% said affordable housing is abundant so the market can't crash.

Across age groups, "the market will crash" was the leading response among millennials, at 44%; for Gen X it was 43%; and Gen Z, 38%. But the baby boomer generation, the response "I don't know" topped will crash, at 38% to 35%. Boomers also had the highest percentage of "won't crash" responses at 28%.

Rising mortgage interest rates worried 58% of those surveyed. Among this group, 7% felt the increases will end within the next six months. The largest grouping, 34%, give a six to 12 month time frame, while 21% said 13 months to 18 months. Another 15% believed rate increases will continue for the next 19 months to 24 months and 23% said these would go on for more than two years.