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A recent LendingTree survey found that due to rising home prices and mortgage rates, nearly four in 10 Americans believe the housing market is at risk of collapsing in 2025, and one in three He says he hopes more people will do so.
Economists believe it is increasingly likely that the economy will have a “soft landing” in 2025, rather than pushing the country into recession. Although home price growth is expected to slow, prices are not expected to fall significantly in many markets.
But the LendingTree survey, conducted online in mid-October by QuestionPro among 2,049 U.S. consumers ages 18 to 78, provides surprising insight into the psychology of home buyers and sellers.
38% of consumers surveyed by LendingTree believe the housing market is at risk of crashing next year, down from 44% a year ago.
Also note that 35% of people surveyed by LendingTree in 2023 expected the housing market to crash this year. That wasn’t the case. Home prices continued to rise this year as mortgage rates fell from post-pandemic highs.
In the latest survey, 36% of those surveyed said they support a housing crash next year, indicating that more than 90 million American adults think a major economic downturn would be a good thing. .
jacob channel
But as Jacob Channell, senior economist at LendingTree, points out, “those hoping for a housing crash are almost certainly going to have a bad awakening when it happens.”
“As the Great Recession demonstrated, when the housing market collapses, the economy is likely to slump with it,” Channell wrote about the findings. “As a result, unemployment will rise, wage growth will slow, and lenders will become more selective about who they lend to.”
Given that the housing collapse will probably bring more pain than relief, why do so many Americans want it?
Source: QuestionPro online survey of 2,049 U.S. consumers conducted October 14-15, 2024, commissioned by LendingTree.
It turns out the answer is not necessarily that they think it will help them buy a home. Only 8% of those surveyed cited this as a reason.
The most common reason given by 12% of renters and homeowners was that the market crash would “lead to more stability in the future.” This suggests that many Americans consider the current disparities in home prices and incomes in many markets to be unsustainable.
Mortgage giants Fannie Mae and Freddie Mac’s 2025 conforming loan limit is $806,500, an increase of 66% from 2019, but this is an increase during the pandemic when mortgage rates have hit historic lows. This reflects the soaring housing prices.
What has also become clear is that many of the people supporting the accident are already homeowners. The second most common reason for wanting the housing market to collapse was the belief that property taxes on respondents’ current homes would go down, at 11%.
A further 6% expected the housing market crash to usher in “broader economic reform” or even a “revolution.”
However, when the survey results were broken down between renters and homeowners, 29% of renters said they believed this was the only way they could afford to buy if the market crashed.
When renters were asked what they were concerned about about the housing market, 42 said home prices were high and 33% said mortgage rates were high. Apparently, 34% said they were concerned about homelessness.
The top concerns among homeowners are rising property taxes (43%), rising home prices (38%) and mortgage interest rates (34%).
Expect mortgage interest rates to fall
Mortgage rates fell below 3% in 2020 as the Federal Reserve cut short-term interest rates to zero and purchased more than $1 trillion in mortgage-backed securities to prevent the economic downturn caused by the pandemic.
But once the Fed shifted gears to combat inflation, mortgage rates rose to a post-pandemic high of 7.83% in October 2023, according to rate lock data tracked by Optimal Blue.
By September 17, interest rates had fallen to 6.03% this year on expectations of a Fed rate cut. However, once the Fed began lowering rates, mortgage rates returned to a fourth-quarter high of 6.85% on Nov. 20, and many homeowners who bought or refinanced their homes when interest rates were low , felt locked into existing mortgage rates.
The Fed has cut interest rates twice this year and is expected to do so again on December 18th. But investors in the bond market, which funds most mortgages, remain concerned that inflation remains unchecked and that central banks will take a more cautious approach. Interest rate cut next year.
Many economists don’t expect mortgage rates to fall below 6% in 2025, but a LendingTree survey found that more than two-thirds of Americans would be disappointed if rates remained high. It has been suggested that the
Source: QuestionPro online survey of 2,049 U.S. consumers conducted October 14-15, 2024, commissioned by LendingTree.
According to a LendingTree survey, 70% of Americans expect interest rates on 30-year fixed-rate mortgages to fall below 6% next year, and 49% expect mortgage rates to fall below 5%. He says he is thinking about it.
Nearly a third (30%) of those surveyed think mortgage rates could fall below 4% next year, an unlikely scenario barring a recession.
While many Americans are predicting or rooting for a housing market crash, more than half (55%) think home prices will rise next year, according to a LendingTree survey. .
This is in line with expectations from Fannie Mae economists, who expect annual home price growth to slow to 3.6% by the fourth quarter of 2025 from 6.7% in the first quarter of 2024.
mark parim
“From an affordability perspective, mortgage rates are above 6%, home price growth has slowed from recent highs but remains positive, and supply remains positive,” said Mark Parim, Fannie Mae’s chief economist. remains below pre-pandemic levels, making 2025 a very similar year to 2024.” He made this statement when announcing the latest forecasts from major mortgage lenders.
Fannie Mae’s monthly National Housing Survey provides the latest insight into consumer sentiment, with only a few Americans surveyed in November saying they expected home prices to rise over the next 12 months. It was 38%.
The proportion expecting prices to fall rose to 25%, the proportion expecting prices to remain stable rose to 36%, and the net share expecting house prices to rise over the next year fell to 12%, reaching a peak in 2024. This has fallen from 28% in 2024. June.
Nearly half (45%) of consumers surveyed by Fannie Mae in November expected mortgage rates to decrease over the next 12 months, up from 39% in October.
Commenting on the survey results, Parim said: “Over the past year, we have seen a significant improvement in general consumer sentiment towards the housing market. This is primarily due to increased optimism that mortgage rates will fall and “This is due to improved awareness of both the buying and home selling situations.”
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