Why Are So Many Americans Predicting A Housing Market Crash?

The housing market has been one of the most vibrant corners of the pandemic-era economy, but a new survey finds more than half of Americans believe it will crash either this year or next year.

What Happened: The survey by LendingTree Inc. TREE polled 2,051 adults conducted between Dec. 17-20 and found 41% of respondents predicting the housing market bubble will deflate during 2021 and force accelerating home prices to fall. Another 26% of respondents forecasted the same scenario in 2022, while 13% did not see another housing market crash in the near future.

LendingTree's Chief Economist Tendayi Kapfidze cast his lot with the 13% of naysayers.

"Though housing heated up late in 2020 and growth is likely to slow in 2021, the idea that it's a bubble that would burst seems unlikely," said Kapfidze. "The mortgage market is healthier than it was prior to the 2008 crisis, and the government is more experienced with interventions that protect the housing market like forbearance and mortgage modifications."

The latest housing data is also not detecting any fissures in the market. This week's S&P CoreLogic Case-Shiller Index found sales were going stronger than ever into the autumn.

"With existing home sales up over 20% from a year ago, S&P CoreLogic Case-Shiller Index clocked a 9.49% surge in November – a new high since February 2014," said CoreLogic Inc. CLGX Deputy Chief Economist Selma Hepp, adding that "buyer competition reached a new peak nationally in October and November when the ratio climbed to 0.996 – the highest level since 2008, when the data series began."

Mat Ishbia, president and CEO at Pontiac, Michigan-headquartered United Wholesale Mortgage UWMC, is also expressing confidence.

"I think the main trend is going to be a very, very strong mortgage and housing year across the board," he said. "Rates are very low, the economy is recovering, and will recover. Housing demand is great, millennials are buying, mortgage brokers are growing their business channel, and the education of consumers is happening. I think 2021 is going to be one of the best years in history from a mortgage perspective."

Why It's Important: Ishbia's company went public last week and is the first in a growing queue of housing industry companies that are responding to the vitality of the housing market by readying for the initial public offering route.

The residential brokerage Compass, the residential mortgage lender and servicer AmeriHome, and Home Point Capital Inc., the parent company of the mortgage originator and servicer Home Point Financial Corp., announced plans earlier this month to pursue IPOs.

Several mortgage companies that announced plans for an IPO in late 2020 — including loanDepot, Caliber Home Loans and Finance of America — are in a holding pattern and have yet to proceed.

Ishbia's concern with the housing market is not aimed at consumer confidence, but instead is centered on whether mortgage companies are able to handle the continued buyer demand.

"Most of the companies that have really struggled are ones that have not invested in technology," he said.

"We're in an interesting industry because nobody wants our product that we're selling. "Nobody wants a mortgage, they want the house, right? Or they want the savings. So how do you make it faster and easier?

"People really have to go all-in on technology," he continued, because too many times companies in our industry spend a lot of time partnering with this vendor and kind of doing a halfway job of really investing in technology. You've got to be all-in with technology if you're going to make the process faster and easier for consumers. If you're doing that, you're going get a lot more business."

And despite the pessimism that many Americans shared with LendingTree, 80% of those polled in the new survey said they still considered the American Dream to be defined by homeownership, with 45% predicting more affordable opportunities will be made available through the policies of the Biden administration.

But not everyone is that optimistic: 31% of survey respondents predicted the new administration will bring fewer affordable housing options and 40% said the historically low mortgage rates that encouraged increasing home sales will begin to rise this year.