Housing 2021 Isn’t The Housing Bubble of 2005

I love reading Logan Mohtasami’s articles in Housing Wire and last week he wrote this article comparing our housing market today versus 2005. Why? First, we have the BEST housing demographics ever recorded in U.S. history from 2020-2024 as Millennials turn over 30 years old and start buying homes. Our country saw some of the worst demographics for housing from 2004-2010 as the Gen X population was much smaller due to legal abortion in the 70’s.

Second, he says “because we have reasonable lending standards, we will not see a catastrophic bad debt speculative boom in sales like we had in 2005, which had a tad over 7 million existing home sales. Third, “housing tenure from 1985-2007 was running at 5 years---now we are at 10 years.” This means demand is lower, but supply is lower too.

Logan is much more concerned that home prices will rise too fast because of this demand, but he is hopeful that a rise in mortgage rates will decrease housing demand and keep home prices from over-heating. Logan shows how an uptick in mortgage rates in 2013 to over 4% slowed housing sales and this happened in 2018 when mortgage rates hit 5% that fall. Logan believes that “higher mortgage rates are the only factor left to balance the market.”

Finally, Logan ends with his thoughts on 3 different new policy ideas. First, “I can confidently say that a homebuyer tax credit would just be adding fuel to the fire and not the best idea under the current housing market.” Second, he says about writing off college debts, “It is utter nonsense to say that college-educated Americans who finish their education are so economically debilitated that they can’t buy homes. If this were the case, purchase applications for mortgages would not be rising since 2014.” Finally, he adds “we can’t count on the ending of forbearance to free up inventory in 2021.”