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As the threat of a recession looms over the country, a growing number of Americans fear that the housing market might be heading toward a crash, a Newsweek poll shows.
A sample of 1,500 eligible American voters were surveyed on May 17 by Redfield and Wilton Strategies as an exclusive for Newsweek. It found that 58 percent of respondents are 'very' or 'fairly' concerned about a possible housing crash in the next year.
Some 23 percent of respondents were only 'slightly' concerned, while 11 percent were not concerned at all about the risk of a crash, and 8 percent didn't know how to feel.
Millennials were significantly more concerned than older Generation Xers and Boomers. Just over a third (34 percent) of respondents aged between 25 and 34 years old were very concerned about a possible housing crash. Only 20 percent of those aged between 55 and 64 were very concerned, and 27 percent of those aged over 65.
The same percentage of respondents aged between 18 and 24 and between 35 and 44, 33 percent, were very concerned about the risk of a housing crash.
About 58 percent of Americans polled by Redfield and Wilton Strategies owned their own home, while 28 percent lived in rented accommodation and 10 percent lived in their family's home. Of those renting or living in their parents' or relatives' home, 49 percent said they hoped to own real estate at some point in their lives.
Some 44 percent of respondents said it was 'harder' or 'much harder' for young people today to get on the housing ladder in comparison to their parents' generation. Just over half (51 percent) replied that this was due to stagnant wages.
Whether they own a home or not, a majority of Americans are worried about an incoming housing crash. The housing market is in an ongoing correction that has stopped and inverted the vertiginous climb of home prices across the country over the last few years.
Between 2020 and 2022, the housing market boomed. Prices skyrocketed as competing homebuyers engaged in cutthroat bidding war for a limited amount of available stock, while mortgage rates plunged to all-time lows.
But it couldn't last: as home prices reached heights that made buying unaffordable for many, demand started to slowly decline—especially as mortgage rates suddenly jumped up following the Federal Reserve's efforts to slow down inflation.
As of summer 2022, the housing market entered what experts call a "correction." Prices started dropping across the U.S., plunging faster in the more overvalued metros, while inventories are being rebuilt. As of April, home prices have dropped for three consecutive months. Last month, the nationwide median sale price was $388,800, according to the National Association of Realtors.
In spring 2022, NAR reported that the median prices of homes in the U.S. topped $400,000 for the first time ever.
The drop in prices is welcome news for aspiring homebuyers hoping to catch a break—but the correction has been quite modest by any other standard. Home prices are still on average $100,000 higher than they were before the beginning of the pandemic, according to NAR.
The same Newsweek/Redfield and Wilton poll found that 46 percent of Americans still think that real estate prices in their local area are too high. But Americans seem conflicted about where they would like home prices to be heading: some 43 percent would prefer prices in their area to increase, while 41 percent would want to see them drop.
Experts expect home prices to continue to decrease, though not significantly. Mortgage rates remain high across the country. This, together with the risk of an incoming recession, and the banking crisis triggered by the collapse of Silicon Valley Bank (SVB) in March, has exacerbated concerns over the future of the housing market.
The last time the housing market was faced with a similar scenario in 2006 and 2007, it crashed. But housing experts and economists have consistently stated that the housing market won't be facing a price drop nearly as dramatic as that experienced during the financial crisis, when the housing bubble burst.
Despite efforts to increase stocks, the housing inventory remains historically low—meaning that prices won't be able to drop too deep. Lenders have been more careful compared to 15 years ago, offering mortgages only to homebuyers with stellar credit.
On top of that, Moody's Analytics Laura Ratz has told Newsweek that her group still expects the country to be able to avoid a recession, despite the current turmoil.
About the writer
Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more