If the AI Bubble Pops, Here’s What It Means for Your Home’s Value

AI stocks have powered the bull market this year, pushing the Nasdaq to new highs and fueling a frenzy around tech valuations. But in recent days, some of the same companies powering the boom—Nvidia, Oracle, Palantir, Tesla—have swung sharply, sending the index through its worst stretch in a month before bouncing back. The volatility has reignited bear market fears and drawn fresh warnings from high-profile investors.

Michael Burry, the hedge fund manager who became a household name for predicting the 2008 housing market crash, has gone so far as to call another short.

After posting an analysis estimating that major tech companies are overvaluing themselves by as much as 20%, Burry shared a picture of his character from “The Big Short” on the floor of his office, looking hopeless amid piles of reports.

“Me then, me now. Oh well. It worked out. It will work out,” he wrote in the caption.

That signal, from that particular source, hits a nerve. Most Americans aren’t day-trading AI stocks. But in the shadow of the Great Recession, homeowners see every violent swing on Wall Street and wonder what it means for the asset that actually defines their wealth: their home.

So, if the AI bubble really does burst, will home prices follow?

History shows the answer is far more reassuring than one might think. Home prices rarely fall just because stocks do, and when the two markets move in tandem, it’s almost always because job losses ripple through the economy, not because tech valuations drop.

Homeowners have more to lose than investors, but they're better protected

On paper, most Americans have some connection to the stock market. About 62% own stocks, according to a recent Gallup poll. But stock ownership is heavily concentrated among the highest-earning households. Nearly 9 in 10 households earning $100,000 or more own stocks, while only 28% of households earning below $50,000 do.

And the value of that exposure is even more skewed. University of Michigan data shows the conditional median stock value is about $228,000, but high-income households hold nearly 10 times more in the market than low-income ones. The disparity highlights just how unevenly exposed most Americans are to an AI stock sell-off.

It's homeownership—not stock ownership—that remains the country’s true financial backbone. For tens of millions of families, home equity is the college fund, the retirement plan, the safety net, and the most important source of wealth they’ll ever build. 

The average homeowner is 43 times wealthier than the typical renter, according to data from the Federal Reserve Survey of Consumer Finance—in large part because of the wealth-building power of homeownership.

Even with so much personal wealth tied up in housing, economists say today’s homeowners are far better positioned than they were during past downturns.

“The typical homeowner today—and the housing market overall—is still well-positioned to withstand a correction without it turning into a crisis,” explains Jake Krimmel, senior economist at Realtor.com®. “Home equity hit an all-time high in 2025Q2; mortgage holders are largely locked into sub-4% rates, giving them lower payments that are increasingly being eaten away by inflation. Very few homeowners are at risk of going underwater, even if prices were to decline 10% to 15%.”

That gives homeowners plenty of breathing room if the stock market swings and the housing market cools. But it also explains why so many people feel uneasy: Households today have more equity on the line than at any point in history, and the memory of the Great Recession hasn’t faded. 

So while Krimmel says a crisis-level foreclosure wave is unlikely, the fear is grounded in a very real reality: When your financial future is tied to your home, even a small market tremor feels personal.

“Obviously, [a stock market crash] is not something anyone wants to see play out, and undoubtedly, if a stock market correction spilled over into the housing market, many homeowners would feel the pain,” says Krimmel. “The silver lining of that hypothetical is that the knock-on effects would not be as severe. Luckily, the history of the housing bust and Great Recession would not repeat itself.”

What actually happens to home prices when stocks crash

History paints a clearer picture of what happens to home prices in a bear market. In nearly every major market downturn of the past 30 years, home prices have proven surprisingly resilient.

Dot-com crash

When the tech bubble burst, the investor euphoria that pervaded the 1990s evaporated. At the bottom of the market, the Nasdaq plunged more than 75% from its peak in a stunning collapse that wiped out trillions in paper wealth.

But while tech stocks were imploding, housing held its ground. National home prices barely dipped. The median home price slipped modestly from roughly $179,000 to about $171,000, then steadily climbed to just under $189,000 by the end of the recession.

The Great Recession

This is the one true exception, and only because housing was the bubble that caused the recession.

Put another way, the financial crisis didn’t spill into housing; housing spilled into the stock market. Over-leveraged loans, loose underwriting, and speculative buying pushed prices to unsustainable levels, and when that structure collapsed, foreclosures surged.

As a result, home prices plummeted—with the national median falling from just under $258,000 before the crash to $208,000 at its lowest point—new construction all but stopped, and the construction industry contracted, laying the groundwork for the monumental shortage in housing stock we have today. 

But while it may be the most present memory of a stock market crash for many homeowners, it doesn't set the precedent for how housing responds to a stock pullback. And the COVID-19 pandemic is another strong reminder of that.

The COVID-19 crash

Stocks fell off a cliff in a matter of weeks as COVID-19 shut down the global economy. Consumer confidence collapsed, unemployment spiked, and the Dow saw some of its worst single-day losses in history—resulting in not one but two “Black Mondays.”

But almost immediately afterward, home prices took off. Their meteoric rise was spurred upward by low mortgage rates, remote-work migrations, and rock-bottom inventory. Within months, bidding wars erupted and prices were rising at the fastest pace in decades.

2022 stock slide

While not a true crash, stock markets saw a significant downturn at the end of 2022. Rising interest rates and inflation sent major indices down, ending the year with their biggest annual drop since 2008.

Housing, on the other hand, softened, but only slightly.

Prices dipped in some markets before stabilizing. Tight supply, strong homeowner equity, and locked-in mortgage rates kept prices from falling much further. And today, those same factors continue to offer homeowners insulation.

OK, but what if the AI bubble pops?

Bear markets are painful. They wipe out wealth, rattle confidence, and can leave a lasting impact on people’s net worth. And with experts openly debating whether AI valuations are stretched, homeowners are understandably concerned that an AI-driven sell-off could spill into housing.

But history and economists are clear on one point: Housing doesn’t fall just because stocks do. 

“Generally speaking, the stock market and housing market can be connected, but usually not directly,” says Krimmel. “If they're moving together, that's typically because of some other outside force (could be driven by policy, Fed moves, and credit conditions, or a large macro shock) and/or because of changes in the job market.”

That’s the key distinction. It’s not stock prices that threaten housing—it’s job losses. Tech valuations can implode and the Nasdaq can dive, but unless layoffs spread and incomes fall, home prices typically hold steady.

And that’s exactly why the Federal Reserve is already acting to stabilize the labor market with a recent series of rate cuts.

“Labor market softness is key for aggregate (and housing) demand," says Krimmel.

It’s the reason, he says, the Fed has begun cutting rates and “may continue to do so in December. Lower interest rates will, in theory, help struggling companies' finances and allow them to keep existing workers, hire more, and/or provide pay raises to top performers.”

The majority of homebuyers aren't powering their purchases with tech windfalls. So if the AI bubble bursts, the impact will be real but likely contained. Markets like San Francisco, Seattle, and Austin, TX—where high-earning tech workers fuel certain segments of the market—may see some cooling.

But for most homeowners, the link between AI stocks and housing prices is far weaker than it feels. As long as paychecks keep coming and borrowing costs stay manageable, a stock market slump won’t take home prices down with it.