Why This Housing Market Is Not a Bubble Ready To Pop

KCM • May 5, 2022

Why This Housing Market Is Not a Bubble Ready To Pop



Homeownership has become a major element in achieving the American Dream. A recent report from the National Association of Realtors (NAR) finds that over 86% of buyers agree homeownership is still the American Dream.

Prior to the 1950s, less than half of the country owned their own home. However, after World War II, many returning veterans used the benefits afforded by the GI Bill to purchase a home. Since then, the percentage of homeowners throughout the country has increased to the current rate of 65.5%. That strong desire for homeownership has kept home values appreciating ever since. The graph below tracks home price appreciation since the end of World War II:


The graph shows the only time home values dropped significantly was during the housing boom and bust of 2006-2008. If you look at how prices spiked prior to 2006, it looks a bit like the current spike in prices over the past two years. That may lead some people to be concerned we’re about to see a similar fall in home values as we did when the bubble burst. To help alleviate those worries, let’s look at what happened last time and what’s happening today.

What Caused the Housing Crash 15 Years Ago?

Back in 2006, foreclosures flooded the market. That drove down home values dramatically. The two main reasons for the flood of foreclosures were:

  1. Many purchasers were not truly qualified for the mortgage they obtained, which led to more homes turning into foreclosures.
  2. A number of homeowners cashed in the equity on their homes. When prices dropped, they found themselves in an underwater situation (where the home was worth less than the mortgage on the house). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more.

This cycle continued for years.

Why Today’s Real Estate Market Is Different

Here are two reasons today’s market is nothing like the one we experienced 15 years ago.

1. Today, Demand for Homeownership Is Real (Not Artificially Generated)

Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Today, purchasers and those refinancing a home face much higher standards from mortgage companies.

Data from the Urban Institute shows the amount of risk banks were willing to take on then as compared to now.


There’s always risk when a bank loans money. However, leading up to the housing crash 15 years ago, lending institutions took on much greater risks in both the person and the mortgage product offered. That led to mass defaults, foreclosures, and falling prices.

Today, the demand for homeownership is real. It’s generated by a re-evaluation of the importance of home due to a worldwide pandemic. Additionally, lending standards are much stricter in the current lending environment. Purchasers can afford the mortgage they’re taking on, so there’s little concern about possible defaults.

And if you’re worried about the number of people still in forbearance, you should know there’s no risk of that causing an upheaval in the housing market today. There won’t be a flood of foreclosures.

2. People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s

As mentioned above, when prices were rapidly escalating in the early 2000s, many thought it would never end. They started to borrow against the equity in their homes to finance new cars, boats, and vacations. When prices started to fall, many of these homeowners were underwater, leading some to abandon their homes. This increased the number of foreclosures.

Homeowners didn’t forget the lessons of the crash as prices skyrocketed over the last few years. Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has more than doubled compared to 2006 ($4.6 trillion to $9.9 trillion).

The latest Homeowner Equity Insights report from CoreLogic reveals that the average homeowner gained $55,300 in home equity over the past year alone. Odeta Kushi, Deputy Chief Economist at First American, reports:

“Homeowners in Q4 2021 had an average of $307,000 in equity - a historic high.”

ATTOM Data Services also reveals that 41.9% of all mortgaged homes have at least 50% equity. These homeowners will not face an underwater situation even if prices dip slightly. Today, homeowners are much more cautious.

Bottom Line

The major reason for the housing crash 15 years ago was a tsunami of foreclosures. With much stricter mortgage standards and a historic level of homeowner equity, the fear of massive foreclosures impacting today’s market is not realistic.


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Considering Buying a Rental Property? Here’s What You Need to Know About Property Managers

By The Lighter Side of Real Estate • July 21, 2025
Considering Buying a Rental Property? Here’s What You Need to Know About Property Managers If you’re considering purchasing a rental property, here’s the good news: they can be a great investment. But they can also be a lot of work, and some homeowners don’t have the skills or desire to put in the work necessary to both take care of their property and ensure it brings in steady income. That’s where property managers come in. A good property manager can bring a ton of value to rental property owners, so if you’re considering buying a rental property, you may also want to consider hiring an experienced, trustworthy property manager. But what, exactly, do property managers do—and how does that help the property owner? A recent article from realtor.com outlines some of their main responsibilities, and the value they can deliver to property owners, including: Market your property. Finding new renters can be a hassle. Property managers leverage a variety of channels (including social media, paid ads, and the MLS) to get your property in front of qualified potential tenants. Vet potential tenants. Once they’ve marketed your property and generated interest, property managers will vet all potential tenants (including running a credit check, checking for past criminal history, verifying employment and income, and calling former landlords for references) to ensure you rent your property to qualified, responsible tenants. Perform property checks. If you live in a different area than your rental property, it can be hard to stay on top of the home’s maintenance and condition. Most property managers do regular home checks (typically, once per quarter or twice per year) to ensure the tenants are taking good care of the property—and will report back if any major repairs or maintenance tasks are necessary to keep the property in good condition.

The Five-Year Rule for Home Price Perspective

By KCM • June 25, 2025
The Five-Year Rule for Home Price Perspective Headlines are saying home prices are starting to dip in some markets. And if you’re beginning to second guess your plans based on what you’re hearing in the media, here’s what you need to know. It's true that a few metros are seeing slight price drops. But don't let that overshadow this simple truth. Home values almost always go up over time (see graph below): While everyone remembers what happened around the housing crash of 2008, that was the exception – not the rule. It hadn’t happened before, and hasn’t since. There were many market dynamics that were drastically different back then, too. From relaxed lending standards to a lack of homeowner equity, and even a large oversupply of homes, it was very different from where the national housing market is today. So, every headline about prices slowing down, normalizing, or even dipping doesn’t need to trigger fear that another big crash is coming. Here’s something that explains why short-term dips usually aren’t a long-term deal-breaker. What’s the Five-Year Rule? In real estate, you might hear talk about the five-year rule. The idea is that if you plan to own your home for at least five years, short-term dips in prices usually don’t hurt you much. That’s because home values almost always go up in the long run. Even if prices drop a bit for a year or two, they tend to bounce back (and then some) over time. Take it from Lance Lambert, Co-Founder of ResiClub: “. . . there’s the ‘five-year rule of thumb’ in real estate—which suggests that most buyers can buffer themselves from mild short-term declines if they plan to own a property for at least that amount of time.” What’s Happening in Today’s Market? Here’s something else to put your mind at ease. Right now, most housing markets are still seeing home prices rise – just not as fast as they were a few years ago. But in the major metros where prices are starting to cool off a little (the red bars in the graph below), the average drop is only about -2.9% since April 2024. That’s not a major decline like we saw back in 2008. And when you look at the graph below, it’s clear that prices in most of those markets are up significantly compared to where they were five years ago (the blue bars). So, those homeowners are still ahead if they’ve been in their house for a few years or more (see graph below): The Big Picture Over the past 5 years, home prices have risen a staggering 55% , according to the Federal Housing Finance Agency (FHFA). So, a small short-term dip isn’t a significant loss. Even if your city is one where they’re down 2% or so, you’re still up far more than that. And if you break those 5-year gains down even further, using data from the FHFA, you’ll see home values are up in every single state over the last five years (see map below): That’s why it’s important not to stress too much about what’s happening this month, or even this year. If you’re in it for the long haul (and most homeowners are) your home is likely to grow in value over time. Bottom Line Yes, prices can shift in the short term. But history shows that home values almost always go up – especially if you live there for at least five years. So, whether you’re thinking of buying or selling, remember the five-year rule, and take comfort in the long view. When you think about where you want to be in five years, how does owning a home fit into that picture? Let’s connect to get you there.

Newly Built Homes May Be Less Expensive Than You Think

By KCM • June 25, 2025
Newly Built Homes May Be Less Expensive Than You Think Do you think a brand-new home means a bigger price tag? Think again. Right now, something unique is happening in the housing market. According to the Census and the National Association of Realtors (NAR), the median price of newly built homes is actually lower than the median price for existing homes (ones that have already been lived in): You read that right. That brand new, never-been-lived-in house may cost less than the one built 20 years ago in a neighborhood just down the street. So, if you wrote off a new build because you assumed they’d be financially out of reach, here’s what you should know. You could be missing out on some of the best options in today’s housing market. Why Are Newly Built Homes Less Expensive Right Now? 1. Builders Are Building Smaller Homes Builders know that buyers are struggling with affordability today. So, instead of building big houses that may not sell, they’re building smaller ones that will. According to the Census, the average size of a newly built single-family home has dropped considerably over the past few years (see graph below): And as size goes down, the price often does too. Smaller homes use fewer materials, which makes them less expensive to build. That helps builders keep prices lower so more people can afford them. 2. Builders Are Offering Price Cuts and Incentives In May, according to the National Association of Home Builders (NAHB), 34% of builders lowered their prices, with an average price drop of 5% . That’s because they want to be sure they’re selling the inventory they have before they build more. On top of that, 61% of builders also offered sales incentives – like helping with closing costs or buying down your mortgage rate. These are all ways builders are making their homes more affordable, so these homes sell in today’s market. Your Next Step? Ask Your Agent What's Available Near You If you're trying to buy a home right now, be sure to talk to your agent to find out what builders are doing in and around your area. They can find new home communities, as well as builders who are offering incentives or discounts, and hidden gems you might not uncover on your own. Plus, buying a newly built home often means there are different steps in the process than if you purchase a home that’s been lived in before. That’s why it’s so important to have your own agent who can explain the fine print. You want a pro in your corner to advocate for you, negotiate on your behalf, and make sure your best interests come first. Bottom Line You could get a home that’s brand new, with modern features, at a price that’s even lower than some older homes. Let’s talk about what you’re looking for and see if a newly built home is the right fit for you. If buying a home is on your to-do list, what would stop you from exploring newly built options?
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