Survey finds Americans want housing prices to fall

A new survey from Consumer Affairs finds that 78% of Americans think a housing crash is coming. In fact, 63% want it to happen — with 84% of Gen Z respondents saying they want a housing bust because it will help them purchase their own home.

If the housing bubble does burst, Gen Z buyers can expect plenty of competition from other buyers — and will need prices to drop by the largest amount.

Three-quarters of all respondents in the survey said they’ve socked away the cash to snatch up a house if prices drop and have saved, on average, $29,504 for a home purchase. Gen Z respondents, however, had the smallest balance of cash on hand for a home — $15,601 on average.

In the past decade, the average U.S. home price has more than doubled, ballooning by a whopping 122% since 2012.

The median home price in the U.S. shot up from $228,000 in mid-2012 to $440,000 at the end of June. Investors snatched up homes in foreclosure during the Great Recession and converted them to rentals, a trend that continues today, severely limiting the number of homes available for sale.

Simply add Capital One Shopping to your browser, and shop like normal. This free tool does the work for you.

Install Capital One Shopping

Pandemic led to skyrocketing housing prices

Once the pandemic hit, demand for homes soared, fueled by ultra-low interest rates that made mortgages extremely affordable, driving prices even higher and well out of the range of most would-be Gen Z home buyers.

Since the Federal Reserve started hiking interest rates in March to combat soaring inflation, the rate of home sales has slowed and, while prices aren’t dropping yet, they are increasing at a slower pace, as rising mortgage rates make already high-priced homes too expensive for many buyers.

As of August, new mortgage applications had fallen to a 22-year low, sales of existing homes had declined for six straight months, and home price growth slowed for three straight weeks, from a peak of 16.6% in July to 13.3% in mid-August. Despite those reversals, home prices remain near record highs at a national median of $449,000.

So far, forecasters don’t see home prices making significant declines, although some see a small drop in prices coming during 2023.

Recession is a double-edged sword for housing

As for the potential for a recession, a new survey of economists from the National Association of Business Economics found that 72% expect the U.S. will be in a recession by mid-2023 — and 19% think the recession already is here.

The Consumer Affairs survey found that 65% of respondents said a recession would force them to sell their homes, with 82% fearing that a housing crash would leave them owing more on their mortgages than their homes would be worth.

That would certainly lead to a significant drop in home prices — with one catch. The kind of severe recession that would be required to send home prices plummeting would also lead to a swooning stock market and higher unemployment.

That would make a home purchase out of the question for anyone out of work — including members of Gen Z.

Here's how to save up to $700/year off your car insurance in minutes

When was the last time you compared car insurance rates? Chances are you’re seriously overpaying with your current policy.

It’s true. You could be paying way less for the same coverage. All you need to do is look for it.

And if you look through an online marketplace called SmartFinancial you could be getting rates as low as $22 a month — and saving yourself more than $700 a year.

It takes one minute to get quotes from multiple insurers, so you can see all the best rates side-by-side.

So if you haven’t checked car insurance rates in a while, see how much you can save with a new policy.

About the Author

Brian J. O’Connor

Brian J. O’Connor

Freelance Contributor

Brian J. O’Connor is an award-winning personal finance journalist featured in The New York Times, The Wall Street Journal, MarketWatch and other outlets. He was the financial editor and columnist for The Detroit News and founding managing editor of Bankrate and a Knight-Bagehot Fellow at Columbia University.

What to Read Next

Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.