Sky-high mortgage rates have led to housing prices that only seem to go up. And the higher they go, the more disappointed prospective homeowners feel.

As little as 19% of those who participated in a recent Fannie Mae survey consider the present market situation to be favorable for buying a house. House prices rose on average around 6% in January, with more increases expected in the months to come. From the National Association of Realtors, Lawrence Yun suggests buyers will have it hard in 2024 because competition will be more fierce, and prices will continue their ascent.

Recent findings from LendingTree (NASDAQ:TREE) also show that almost half (44%) of potential buyers are panic-stricken by the looming idea of the housing market collapse that can occur by the end of the year. About a third hope there will be a drop in house prices, but uncertainty remains a sure concern for prospective buyers.

The Federal Reserve’s efforts to raise interest rates did not significantly impact house prices. Prices increased due to inventory limitations brought on by COVID-19. However, yearly growth remained stable at 5% to 6%, avoiding a correction, while the market stabilized and mortgage rates increased to 8%.

Renowned analyst Meredith Whitney, who has predicted the financial sector with pinpoint accuracy, sees a change around the corner. Here’s her take on this sector, and what American homebuyers can expect.

Whitney’s Research

In Whitney’s paper, “The Crisis of the Young American Male and Its Impact on Housing Demand,” Whitney forecasts a 20% decline in home prices, attributing this trend to demographic shifts. She mentions that most U.S. homes are owned by individuals over 40 who are estimated to downscale once baby boomers age out. That may result in 45 million houses coming onto the market simultaneously.

There are also changing trends in the younger generations, specifically among Millennials and Gen Z, who have differing preferences on homeownership. Additionally, she points out a quite noticeable increase in the percentage of single men who live with their parents, with one in five reporting this to be the case.

Whitney’s study, however, does not consider conflicting estimates from sources such as Freddie Mac or the possible effect of higher immigration rates on the housing market.

Housing Market Outlook

Potential purchasers are at their wit’s end with the ongoing rise in housing prices despite high borrowing rates. In February, the prices of newly built homes went up again for the eighth month in a row, compared to the previous year. The typical price of these existing homes increased by 5.7% year-over-year. January’s S&P CoreLogic Case-Shiller Home Price NSA Index showed a 6% rise in value over the previous year. In contrast to predictions of a housing recession, the market recovered, and home values rocketed.

Because the housing availability numbers continued to dwindle, home values stayed stable even when mortgage rates jumped 8% in October 2023. NARS’s February data will tell us that inventories are only 2.9 months’ supply. So, analysts like Rick Arvielo and Skylar Olsen believe that an imbalance between supply and demand is causing the ongoing home price increases. Olsen even says there will be more price hikes in 2024, an obvious hurdle for those buying for the first time.

In the article found in Realtor.com, the March 2024 Housing Market Trends Report says that rising mortgage rates bumped up the average home’s monthly financing cost by 2.9% compared to the previous year. Real estate analysts, though, predict only a minor market correction and not rock bottom like the Great Recession did.

Current State of the Housing Market

Is there a collapse in the housing market in the 2024 horizon? Let’s look at the facts.

There is an obvious adjustment, but it varies by region. Goldman Sachs (NYSE:GS) anticipates price reductions in some cities due to higher inventory, but a national downturn is out of the picture. Home value is growing at a snail’s pace, FHFA and CoreLogic statistics say, pointing to a stabilizing trend.

Growth in both jobs and wages has been consistent. The Bureau of Labor Statistics shows that nominal wages rose by 0.3% in March, marking a 4.2% gain in the previous year. The unemployment rate was 3.5%, and 345,000 jobs were added per month on average in Q1. Although labor market resiliency allowed consumers to keep spending, the Fed will likely push interest rates into new territory.

In addition, foreclosures have increased, but many homeowners still have plenty of equity and are well-rested. Homeowners are less concerned compared to 2020, since they carry less debt now, and their homes hold more weight. Not seen since early 2012, the Federal Reserve came face-to-face with a 0.7% decrease in homeowners value in the fourth quarter of 2022. In Q3, though, equity rose 0.2%, almost reaching the $31 trillion line; changes in property prices were the cause of these equity changes.

The lack of confidence among homebuilders is causing the housing supply to stagnate. From January to December 2022, builder confidence swooped for 12 months in a row, according to the National Association of Home Builders (NAHB), hitting levels synonymous with 2012, so it was difficult for new houses to be built. In 2024, NAHB sees a potential rebound.

Home sales have shrunk until interest rates normalize because many prospective buyers have pushed back their purchases due to rising interest rates and a shortage of available houses.

The Possibility of a Market Crash

The housing market isn’t poised for a crash. Even though there are more buyers than sellers, a substantial price fall is unlikely due to insufficient supply. As experts like Dave Liniger have pointed out, rising mortgage rates may encourage more demand. NAR’s Yun says national prices should stay steady despite minor decreases in specific local markets.

Unlike the overinflated market of 2005/2007 that led to a worldwide economic collapse, worries about growing mortgage rates and impending recessions haven’t shaken experts’ convictions. Prices may take a fall, but not to the depth of the Great Recession. Many homeowners now have significant home equity, low fixed-rate mortgages and a credit position to be proud of.

After the Great Recession, builders were cautious, so homes were persistently scarce. Due to limited supply, price drops may happen in some markets, but less than in the past. Home prices are rising full throttle, leaving salaries in the dust despite cooling predictions, which has made matters worse by doubling mortgage rates since August 2021.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.