Many people wanting to buy homes are feeling discouraged because mortgage rates are high and home prices keep rising. In a recent survey by Fannie Mae, only 20% of people said now is a good time to buy a house and housing market crashes. Home prices went up by 6.49% from last year, according to the latest S&P CoreLogic Case-Shiller Home Price Index for March 2024.The tough housing market has a lot of potential buyers worried. Some are wondering if home prices might ever go down or crash soon. Surprisingly, a survey by LendingTree found that 44% of Americans think the housing market could crash this year. More than one third of them actually hope for a crash because they believe it's the only way they'll be able to afford a home.

Will the housing market crash in 2024?

Even though many Americans worry that the housing market might crash, most economists who study housing markets do not think it will happen in 2024 or in the near future like Washington Luxury Real Estate.
According to the latest forecasts from leading industry experts, home prices are expected to rise by 2% to 4.8% this year.

Understanding housing market dynamics

Economists are confident that home prices won't crash mainly because there aren't enough homes available for sale. Lawrence Yun explains that when there's a shortage like this, the basic rule of supply and demand means prices can't drop sharply.
Right now, the United States doesn't have enough homes to meet the demand. Realtor.com estimates we're short by anywhere from 2.3 million to 6.5 million homes needed to keep up with how many people want to buy them. Even if a lot of people suddenly stopped looking to buy homes, there still wouldn't be enough of a drop in demand to make prices fall by a lot.

Current state of the housing market

It's understandable that some people who want to buy a home think their best shot is if the housing market crashes. But they might not know that the last crash actually helped create the housing shortage we're facing now.

How the last housing market crash helped create today's conditions

In the mid-2000s, many lenders were giving mortgages to risky borrowers without checking their documents properly. At the same time, builders were constructing lots of new homes to keep up with the growing demand.
"There were so many homes being built," Yun explains. "Builders were really active, creating a surplus of houses."
When the housing market crashed and caused the Great Recession, it devastated the home-building industry. Many companies went bankrupt, and a large number of builders left the industry for other jobs.
After the recession, the housing industry struggled to bounce back, and not many new homes were built. Now, more than ten years since the recession ended, homebuyers are still feeling the effects of that crash.

How low demand can cause a housing market crash

If fewer people want to buy homes all of a sudden, it can cause a housing market crash. This might happen if a bunch of potential buyers lose their jobs during a recession and can't afford to buy a house anymore. When nobody is buying homes, their values can drop sharply.

High mortgage rates can also lower demand for homes. However, on their own, high rates usually won't crash prices. But if there's already a lot of homes available for sale, even a small decrease in demand could make prices go down.

Increase in supply can cause a housing market crash

Even though it's difficult to imagine right now, there could be too many homes available in a certain area. This happens when builders build more homes than people need, or when economic problems cause many homeowners to lose their homes through foreclosure. In this situation, a bunch of new homes would flood the market, and economic conditions might stop other buyers from being able to buy those homes.

Changes in how many homes are available or how many people want to buy them don't always mean a crash is about to happen. Prices might stay the same for a while or go down a little without crashing.

What would a housing market crash mean for homebuyers?

No one can predict exactly what will happen in the housing market in the months and years ahead. If the market were to crash, some people might think it would be easier to buy a home.

It's a possibility, but it really depends on why the crash happened. If it's similar to the last crash, where a lot of people lost their jobs, then lower home prices might not help many buyers because they might still struggle financially. Also, considering how few homes are available right now, it's unlikely that prices would drop a lot unless there's a big economic problem affecting many people.

Preparing for a potential housing market crash

Right now, you probably don't need to worry about the housing market crashing.

But if you're thinking about how to get ready in case a crash happens later on, here are some things you can do:

Save up an emergency fund

Avoid spending more money on a home than you can afford.

Choose a fixed-rate mortgage to avoid unexpected payment increases

Put down a larger down payment to build equity in your home

How to buy a home in a challenging market

Instead of hoping for lower prices, here are some things you can do to achieve your homeownership dreams in 2024.

Expand your search

If you can't afford to buy a home where you currently live, think about exploring other nearby areas. Talk to a local real estate agent to see if you can find better prices a few towns away. Home prices can vary a lot between different neighborhoods, so it's worth checking out.

If you're in a big city where homes are expensive, moving to a nearby area outside the city limits could make buying a home much more affordable for you. Just remember to think about other things too, like how far you'll need to commute to work and if you want to be close to specific schools.

Wait for mortgage rates to fall

Here's some good news for people looking to buy homes: Mortgage rates are expected to decrease later in 2024. While Yun believes they won't drop as low as they did in 2020 and 2021, experts predict that 30-year fixed rates could gradually go down over the next few years.

When mortgage rates are lower, more people can afford to buy homes. As rates decrease, you could save hundreds of dollars each month on your mortgage payment, making homeownership more affordable.

Closing Remark: 

As concluded by Kirkland houses for sale, while concerns about a housing market crash persist among potential buyers, economists foresee stability in 2024. High demand and low supply are expected to keep home prices from plummeting sharply. For now, focusing on saving, affordable mortgages, and strategic location choices can better prepare buyers for current market challenges.