Word for thinking something is happening when it's not

Feeling imaginary symptoms is a kind of delusion.

Macmillan:

delusion
NOUN
2 [UNCOUNTABLE] MEDICAL a mental condition in which you believe things that are not true

Such a condition is a psychogenic disease.

psychogenic [sahy-kuh-jen-ik] adjective Psychology. having origin in the mind or in a mental condition or process: a psychogenic disorder.

From dictionary.com

EDIT (by third party):

As m69 points out in a comment below, the word psychosomatic is often used to refer to physical symptoms with psychogenic components. From the Wikipedia article on Psychosomatic medicine:

Psychiatry traditionally distinguishes between psychosomatic disorders, disorders in which mental factors play a significant role in the development, expression, or resolution of a physical illness, and somatoform disorders, disorders in which mental factors are the sole cause of a physical illness.

Thus, somatoform disorder describes the condition of physical symptoms arising from purely psychological origins. This has been known in prior years as a somatization disorder.

The word would be illusory.

Definition of illusory (taken from Merriam-Webster Dictionary)

: based on or producing illusion : deceptive illusory hopes