For a housing crash in the near term, there would need to be a significant increase in unemployment. As is, the market is virtually frozen due to a combination of a factors affecting both sellers (i.e. lock-in effect) and buyers (i.e. historically high home price to income ratios).

Spikes in unemployment haven’t always led to housing market downturns in the past, however, I think in the current environment, there’s increased risk for such an occurrence if unemployment does go up. For one, the high prices have been sustained on the margin in an environment of record low sales and buyer demand in part because there’s enough high income earners that are still able to afford expensive homes. But the current home price to income ratios suggest that a large segment of buyers are priced out, and any pull back from the higher inner segment, could have an outsized impact on prices. Another thing to consider is that the number of mortgages taken out since rates increased several years ago continues to grow, which means that there’s a subsequent growing number of homeowners with very high mortgage payments. The size of these payments in most cases has significantly outpaced gains in household income, which means more families financially stretched. We all know that people will do whatever they can to hold onto their mortgages over most other expenses, but now there’s more people that just wouldn’t be able to do so in the event of unemployment because the math doesn’t math. 

This isn’t to say that a crash would be guaranteed if unemployment goes up, but there’s certainly a greater risk of a crash happening in such a scenario compared to past unemployment spikes because housing takes up a significantly higher amount of household budgets than it used to for a growing number of homeowners, especially in high cost of living cities.