There's been a global bubble in property prices in recent years - not just in the USA, but in the UK, Ireland, Australia, France, Spain, China, India - everywhere in fact.
Underlying it has been an age-old instinct to secure your shelter as soon as you are able to. Of course when too many people decide to buy at once, prices get bid up, and things are not helped when the speculators move in to try to cash in on the phenomenon.
Economists have been predicting for years that prices in the UK, Ireland, Spain and the USA would collapse under their weight. Now that interest rates are starting to rise for the first time in fifteen years, this might be the trigger that collapses property prices.
What to do
First of all, Don't Panic. Just as booms happen when people rush to buy all at once, overwhelming sellers, crashes happen when people rush to sell all at once, overwhelming buyers.
If you are happy with your house and don't need to move for any reason (eg relocation due to job), then sit tight and wait things out. Keep in mind that the purchase price of your property isn't the true cost of it - the true cost is the amount of interest and capital that you pay over the lifetime of the loan. Crude rule of thumb suggests you pay about three times your purchase price by the time you are done. It puts small drops in the selling price in perspective. Most people pay more in interest on their mortgage than they do in tax.
If you are in a secure job, and don't need to move, build up emergency savings, and then start to overpay your debt. That way, if the crash develops you can take advantage of depressed purchase prices.
I did just this in the early 1990's UK property crash. The value of my flat fell by a whopping 30%. In addition, it was a small starter property, and I felt increasingly cramped in it as time went on. But my career was developing and my pay increasing, and I started to pay down the mortgage as ferociously as I could. I eventually managed to get the debt down to a point where I was able to afford to buy another house in addition. I got the new house at a good price, thanks to the crash, and thankfully moved in and rented out the flat. Eventually prices moved back up and I was able to sell the flat for more than I bought it, plus I'd built up a good whack of equity in it, due to paying off the debt early.
But I'd never have been able to do any the above if I hadn't paid down debt. If I'd just left things, I'd have had the dubious pleasure of living in a cramped flat and by the time prices rose sufficiently to sell, of buying a new house at a much higher price than I actually secured due to paying down debt.
If you do run into problems, because you need to relocate, or you've lost your job, there are a couple of things you can do.
If you are relocating and can't sell, explore renting the property out instead.
If you've lost your job, consider taking in a lodger or two. True this will cramp your style, but it will continue to pay your mortgage and allow you to keep your shelter while you look for a new job. In the UK, you are allowed to rent out one room in your house tax free.
If the payments are getting a too high for you due to interest rate rises, consider doing a second job on the weekends - anything will do, as long as it brings in money and helps you keep your home. People tend to refuse this option due to pride - but what is worse, stacking a few shelves and keeping you home, or losing it?
Speak to your lender if you run into financial difficulties. Most will be anxious to help - it's expensive for them to repossess your house and auction it. They'd rather you stayed put and paid a reduced amount. They should be able to either switch you to an interest-only mortgage or reduce your payments by lengthening the term of your mortgage.
Property crashes are never fun. Those who survive tend to be those who are prudent enough to have built up emergency savings and to have paid down their debt.