Are Today’s Housing Market Conditions Starting to Feel Like 2008?

Question

Obviously, no two markets are exactly alike. The causes behind today’s high home prices, limited inventory, interest rates, and affordability problems are not identical to what happened before the 2008 crash. Back then, we saw risky lending, excessive speculation, adjustable-rate mortgages, and many people buying homes they ultimately couldn’t afford.

Today, the situation seems more complicated. Home prices have climbed significantly, monthly payments are much higher, and many buyers are struggling to make the numbers work. At the same time, homeowners who locked in very low interest rates may be reluctant to sell, which has kept inventory tight in many markets.

That raises an important question: Are we looking at another major correction, or is this simply a slower market that needs time to adjust?

Personally, I don’t think the current market is an exact repeat of 2008, but I do think there are warning signs worth paying attention to. Affordability is a serious concern, and markets can only remain disconnected from people’s incomes for so long.

James Mc Ree · Answer

Today's market is nothing like 2008. The 2008 market was built on massive mortgage fraud that someone a large professional population recognized and just thought somehow the party would just keep going. Mortgages at 125% LTV with no proof of income? What could go wrong?!

Today's prices are higher. They always are. I don't know that there is any 10-year period in history that real estate didn't appreciate. This is purely a function of supply, demand and personal income. The cure for high prices is high prices. They will come down when the market says it is the right time. I don't see a crash at all unless personal incomes crash. Prices will stay stable or increase so long as people have incomes to pay their mortgages, rents and other bills.

Rates are historically normal. Folks used to 3% and less mortgage rates think they are high. Older folks who experienced 10%+ appreciate them for where they are.

Personal income is up significantly along with property prices. $1 Of personal income enables $4 of purchasing power with a 75% LTV mortgage. Rents are higher too which are what enable investors to afford the properties as rentals. This is how buyers afford those high prices. We hope their incomes hold up or there will be a rise in mortgage foreclosures and evictions. Watch those monthly figures for an early indicator for large scale changes.

Jay Hinrichs · Answer

Completely disagree with you..  Inflation under the last admin went nuts I think we can all agree to that  and this admin brought it down by 50%..  the war ya gas prices are back up to where they were under the last admin.. we have short memories..

REAL estate values start at the land values  and farmers or those that own development land create the floor the floor has risen cant force farmers to sell dirt for less because they need to create affordable housing.  And then you have government regulations heavily influenced by the last admin that are over the top.. I mean I develop in blue states and red states and I can tell you the Blue states  CA OR WA are a nightmare on regs which totally drive up the price of homes for instance in CA new homes have to have a solar component that cost money.. Along with doing full blown EIR's that will cost a developer 200k to over 1 mil before any approvals. who pays for that ???   go to Red state  TX  and none of this exists. common sense.

And again its not an issue first time buyers can buy in Indy they just dont want to live in the affordable neighborhoods thats the bottom line I mean gosh I fund flippers every week in all these markets and as is homes are being sold for 50 to 100  rehab 30 to 50 so 200k and under all day long if someone cant afford that then they are simply not financially ready for home ownership.  Not sure why home owner ship should be a right instead of a privilege for those that get their financial house in order ?

Jules Aton · Answer

Agree prices of everything are through the roof but there are starter homes for sale in the few areas I keep tabs on. I believe much of the stalemate is that young buyers aren't willing to live in an actual starter home.

Jay Hinrichs · Answer

Exactly there is no affordability issue there is a ( I deserve to live in a certain area issue)  at least as it relates to a good portion of the country.

the expensive markets like SF bay area  prime LA  prime NYC  Prime DC  etc etc have always been expensive and were never affordable for starter homes.

to buy a starter home in those area or a first time buyer took a lot of sacrifice  and discipline on the financial side or inheritance.  I used to always joke about where i lived in Palo Alto in the 80s prices were already at 400 to 600k for a 1200 sq ft 3 and 1  but buyers they had used toyota camry in the driveways.. Not what you see today with buyers driving expensive cars and going into massive debt for them then try to buy a house.

When I ended up in Portland OR  mid 90s prices were about 250 to 300k for a very nice home  bay area would have been double to triple but those folks would have two new cars and anRV and maybe a boat.  LOL  comes down to priorities.

Lastly this is nothing like the GFC I lived through that sucker and credit dried up over night we still have credit its just that the rates are not artifically low like they were post GFC.  And folks now dont have a lot of personal knowledge or history of the markets the last 50 years to put it into perspective they only have maybe post GFC to compare to everything.

Marcus Auerbach · Answer

Okay, let's forget about the 2008 headline - that was a bit clickbaity. We have many issues, but there is literally nothing in this market that looks like 2008.

Affordability is only an issue for first time home buyers who spend their  vacation in Italy, get their food door dashed 3 times a week and have an $800 car payment.

We have an expectation problem: home buyers expect luxury, investors expect instant cash flow. Just think for a moment how crazy that actually was 10 years ago to just buy a few houses without much capital and quit your W2. And while it's possible for a young investor to buy several homes, we claim affordability issues??

Home prices can and will not decline. First off, real estate prices are downward sticky: seller will rather wait than agree to sell for a loss. Second, inflation has become a fixture of our economic model and is no longer a temporary issue. The USD is loosing value every month, so that alone makes nominal home prices go up.

Lack of inventory is going to remain an issue for many parts of the country. This keeps upward pressure on prices. We have a few select markets like the FL condo market and parts of Texas, where locally supply exceeds demand. That has caused YoY prices to go down single digits, but they are still massively up compared to 5 years ago.

We have a lot of problems, but a 2008 style real estate market is definitely not one of them!

Jay Hinrichs · Answer

Marcus agree totally with the expectations and how first time buyers use their financial resources on day to day life.  I mean its well documented with folks having a 20 dollar a day coffee habit :)

Not sure if you meant to say home prices can and will not decline or if you meant to say they can decline.. As many markets prices have come down not melt down but down from the highs for sure.. I have been shopping lately for a 1031 exchange and markets I have been looking at from Vegas to Butte Montana all show price reductions on Zillow  I dont track retail pricing out east or mid west as the props we fund are heavy duty fixers so cant really judge there.  Also many investors that have done flips have ended up having to refi to get out of the short term bridge loan .. Not end of world in most cases they dont have much cash into the deals either forced equity sufficed for the equity needed for the refi..

but from my real world experience the last 60 days looking for properties price reductions are real..  Bought in peak of market in 23 or so and try to sell today and generally speaking with sales costs those will create capital loss's for the sellers..  Which frankly is normal real estate bought to live in at retail prices is rarely going to cover holding and sales costs if you have to exit in a few years.. And for investors you also have recapture so its even worse for investors

Jaron Walling · Answer

It feels like the current administration and economic policies are killing first-time buyers. It's creating the biggest stalemate in housing market history. I don't think anyone would disagree with my statement.

It's like driving a car; the administration pushes on the gas (Iran war, tariffs, economic stressors) and the FED pushes on the brakes trying to tame inflation. They keep doing the same over-and-over again, gas-brakes, gas-brakes, all the while the middle class and prospective first time buyer goes broke. How is this sustainable?? How is this going to lower the average age of first time buyers? It's 40 years old now which is insane.

Rob Bergeron · Answer

One thing I'd add from the ground level: 2008 was a supply-and-leverage problem. What I'm watching looks more like a payment-lock problem. My market (Louisville) closed August at 4,490 active listings, up 33% YoY, and 3.5 months of supply, also up ~30% — inventory is genuinely loosening. But pending sales are down 26.3% YoY and days on market are up to 46 (+21%). That's not distressed sellers dumping inventory — new listings are actually up 3.5% YoY too. It's buyers and sellers both stalling, waiting to see who blinks first on rate or price. Median price is still up 1.5% YoY here — no cracking, just molasses. Feels less like 2008 and more like a standoff.

Divin Kanyama · Answer

@Star Moses Maybe not 2008, but there are still real pressure points.

Lending standards are stronger today, and low-rate homeowners are keeping inventory tight in many markets. At the same time, affordability is stretched, and if incomes, rents, and monthly payments stay out of balance, some local markets may have to adjust.

That does not always mean a major crash. It could look more like slower sales, more seller concessions, longer days on market, or price corrections in certain areas.

For investors, this is a good environment to underwrite conservatively and avoid relying too much on future appreciation.

Victor Garcia · Answer

no, the conditions are different. We don't have crazy loans. Anybody that got a loan is cause they can't afford the payments. Some areas have been declining and value, but not crazy mainly Texas West Florida has been hit hard in some parts but I live in East Florida southeast Florida to be exact and we're doing fine. Prices are actually climbing inventory is low not as slow as a few years back but still under five months now interest razor climbing that might put a dent on price, appreciation and affordability but definitely not a 2008 situation

Are Today’s Housing Market Conditions Starting to Feel Like 2008?

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