Everyone Predicted a Housing Crash, Here’s Why It Didn’t Happen

A lot of people are waiting for a housing crash that didn't happen, and what they don't understand is that was part of the plan. The issue is in 2026, people are also going to expect a crash and that's going to affect their buying decisions. Yeah. I don't know if you guys watch, sometimes we watch that CBS, but Brian Moynihan, the CEO of Bank of America was on this week. On Sunday morning. Yeah. And it basically supported a lot of what we were talking about. Now, obviously he's the president of a bank, so give me a break, but the reality is they are the largest lender in the country. And so he had some really, really, really good facts, but the one thing that he said that we completely lucked at each other, not at our head was that housing is structurally broken right now because of the supply problem. He kept going back to that and going back to that and going back to that because it started in 2008. And I think that I was like, yes, finally somebody, you know, obviously it's not a, it's just easy math. When 2008 hit, obviously everybody pulled back, banks pulled back, you know, the, they were getting a lot of real estate back, there was a lot of real estate owned and there was not a lot of building and not a lot of lending. However, people continued to get born and, and people started to age out and, and all of that stuff happened. And so here we are sitting with a shortage that actually started gosh, about 16, 17 years ago. Yeah. And, and let's lay out what everyone thought was going to happen in 2025 and a lot of people still thinks going to happen in 2026. So they're seeing that rates have doubled, you know, they've went up high and then, so people think prices should collapse, but they also think that people can't afford housing. So buyers should disappear and recession fears are going to create for selling. So that's kind of the narrative, right? And a lot of the headlines promoted that a 2008 style reset, you know, massive inventory don't buy now, just wait. And that just didn't happen because the market didn't crash. It just stalled. Yeah. And I think what we're, what we're really kind of the point of this is, is to predict what's going to happen in 26, but also to also refute a lot of these crash bros that are talking about, you know, just trying to get clicks and everything. And I, having been through this personally in 2008, I can tell you there's only one thing that creates a crash. And that is when, when sellers are forced to sell period. And why would they be forced to sell? There'll be forced to sell because of foreclosure, which right now are historically at a low and delinquencies, delinquencies, which are really low. Those are the ways that things crash period. But let's talk about 2008 because in 2008, you had these adjustable rate mortgages. So imagine you had a 4% rate and all of a sudden one month, it just went to 8%. And that was that, well, that would obviously put a lot of strain on you when you planned on selling it or refinancing it before it hit that 8%. And then the people couldn't refinance it because it was underwater. So they would have to put down money to be able to refinance it that they didn't have. So that's what happened in 2008. And that's important because without the adjustable rate mortgages, 2008 probably wouldn't have happened. Well, right. Right. And having been through it, I, you know, that's, there is also to your point, if you're looking at the future and you're looking at 2026, there is no rate adjustment mass reset period. There just isn't. Right. So, so what you have going into 26 is a, is an affordability problem, a supply problem. And yes, the amount of sellers has gone up for sure. And the buyers of course are strapped a little bit because of the higher rates. Okay. We do know this. But it's just moving back to what's still below normal historically. And so, you know, we're not in any kind of position. However, I do think though, the big issue is, you know, it's still not a great time to buy because I know a lot of people would be upset about this. I'm talking about on the investment side. On the investment side, things are really, really tough to cashflow. On the single family residential side, the real question is if you're going to move into The real question is there's over 60% of the people in the U S they say 60 to 65% under 4% on their rate. Okay. So that they, you know, they call that locked in equity. If they need access to that equity, then of course they're going to sell and move into something that they're going to pay more for. That's for sure. But if they don't, they're going to stay put. And that's the situation we're sitting at. So what's going to happen is the one thing that creates high prices, you know, isn't under supply and that's where we are. And the minute that stuff gets unlocked, and even the CEO of Bank of America said this, the issue has been regulatory, it's been zoning, it's been the higher rates. You know, that's what's actually keeping prices high. And it's really, really interesting because if you take a look at commercial, the fundamentals and I'm talking about apartments, the fundamentals of the apartments have actually been fine. So my properties are still 93, 94, 95% occupied, but the values are down because of the rate. That's a really important thing to understand. So the apartments aren't crashing either, you know, so operationally, you know, most of the markets are in their nineties. That's a healthy market. But the rate itself drove the values down. On the other side of that, the high rates on residential are actually keeping the prices high because low rates help builders build and the economy starts to flow. But then, of course, a low rate could potentially create another bubble. So let's talk about why housing didn't crash, you know, because everyone thinks it's going to, and if you still think it's going to, it's important you understand why it didn't. So you can look at this for 2026 as well. So the first thing is obviously the lock-in effect. Like most people have no mortgage or a mortgage under 4%. So to give that up would be, you know, for them to upgrade into a different house would cost them a lot more money, but it also makes them comfortable. So there was no forced selling. So like Ken was saying in 2008, a lot of sellers just kept dropping their price just to get out of it or eventually just giving it back to the bank because it was underwater. But right now with these low rates, why would you feel forced to sell unless you were in a unique situation? Yeah. And I want to, I just want to really let everyone know that slightly lower rates for 2026 will not fix this. Okay. It just won't. Like, you know, we're still in the sixes, right? For residential? Yeah, around 6.2. Okay. So, and they've come down, which is awesome, right? And that's going to help people. That's going to help realtors and maybe people will start building again, maybe. But you think about it's still two to three percentage points higher than it was not, not long ago when of course we started to see all the supply and all the transactions. And when, when, when, when this stuff does unlock, watch out if it ever does, right? Like if you guys, Danielle has a 2.8% loan on one of her properties, 2.8, and she's got a lot of equity and she sits there and she struggles over, over the fact that, you know, she wants the equity, but she also wants the rate. She's not alone. And I'm telling you, there's a lot of people that are sitting there as you guys would, especially heading into this period of uncertainty with potentially inflation and, and maybe flat wage growth, the AI thing, you know, all of those kinds of things are a little bit, just create a little bit of uncertainty moving forward. So, so if you're sitting there with a low mortgage and you're comfortable in your home, anything beyond that is a little risky, right? Like, like moving from that comfortable position is risk. And so what that's going to do, it's going to, it's going to keep the, it's going to keep prices continue to move up. So let's talk about the other reason that a crash didn't happen. And this is a lot about these homeowners, you know, like, like everyone likes to focus on home buyers can't afford this, but crashes happen because of homeowners. So homeowner balance sheets are strong. Right now they have a record equity and they have very low leverage compared to 2008. So in 2008, you did not really have to put any money down. You could do zero down loans. So you could just get a loan without putting any money down right now. Most buyers are having to put down at least 10%, if not 20% to purchase the home, right? Because they have to qualify for the payment as well. So, you know, yes, you can get a loan as low as 5%, but then you have to qualify for that monthly payment. So you have a lot of buyers putting 10, 20, sometimes more down on these homes. So they're in a really good position because they have a lot of cushion, right? And in 2008, people couldn't wait because they were underwater. Where right now people can wait for prices to go back up for them to sell if they need to. Yeah. And let me, let me tell you a story that, that, that happened to me. It was about 2007, 2008. And you know, in the apartment business, we screen people, like we screen them for criminal credit background checks, obviously, as you would to make sure that they can afford the rent. And we would, we would, we would screen people. And like normal, you know, there are most people are fine, but some people aren't. And the ones that aren't, we're actually buying houses. So I was like, what's happening? Like, we, we know what their credit is. They're filling out applications and they can't afford to rent apartments based on a, just a basic three to one income ratio, which means that if your rent's a thousand bucks, you got to make 3000 bucks. If it's 2000, you got to make 6000. So it's pretty, pretty simple. But they were going and buying houses. I called my partner, Ross, and I said, something's going on. Like, you know, you could fog a mirror and get a house. In 2008, they were giving out mortgages like crazy. They called them no-doc loans. And no-doc loans means that literally you don't have to, you don't have to provide any information to show where you're working, any of this stuff. It's nuts. So what Danil's saying is, is really, really wise. That does not exist right now. The banks learned their lesson. They still kind of remember what happened back, you know, 15, 16 years ago. And, and so the banks are operating much more diligent now. They're, they're, they're requiring down payments. Who knew? Like, you know, and, and, and so the, this is not 2008. In 2008, it was a mess. There, there were all kinds of people that got loans that shouldn't have gotten loans that, that, you know, it was, it was super clear. If you were in the business, it was super clear what was happening. Yeah. And right now it's hard to get a loan. I mean, even when I buy a property, I mean, they put me through the ringer on documentation and updated this and where this come from. And, you know, I need to submit my credit card balance up to like the final week before I get the loan to make sure, you know, so they're very critical right now on getting a loan, which means the people that are able to obtain them are well-qualified for them. Um, now somebody did bring up. Yeah. But what if we have a mass unemployment episode and that is a real factor and that is one of the factors you do need to be watching. But realistically right now, unemployment is not high. I mean, it's going up. Sure. But it's not high. And what is, what does that actually mean? I think isn't, uh, by the way, a very astute comment. You're right. That is one thing we all have to watch, but it's going to tick up from what is it? 4.2 now or 4.5 or something. Yeah. Okay. Then it's going to go to 4.6, 4.7. It's going to be like a, like a frog in the pot. It's going to be slow, slow. It won't even know. And you, however, will be able to watch real time as this happens. But 2026 is, is, is not going to be the year where you're going to see this. Um, you know, it just isn't going to happen. Uh, we've already seen a lot of mass layoffs. You know, who knows how far AI will go? That's debatable. But the reality is, is, um, you know, you, you guys, you guys are not going to see a mass layoff this year. Uh, and it, and it'll, it'll happen slow over time. And there'll be all kinds of people that will be all over that issue because a mass layoff, uh, high unemployment is, uh, is a game changer. Yeah. And it would really affect how the fed handled the rates, right? Like if we have high, if unemployment starts to drastically tick up, the fed is going to urgently lower rates. So you have to remember, like the things don't happen in a vacuum, right? Like housing crashes don't happen in a vacuum. High unemployment doesn't happen in a vacuum. The system doesn't want any of that. So they react to that to help prevent it. So unless you just think everything's going to crash and unemployment's going to go up and the government's not going to be able to do anything about it. And then, you know, and if you can have that belief, but the data right now is just not supporting that. And this is why it's going to get people stuck. And this is getting buyers stuck, especially first-time buyers, because first-time buyers have a lot of fear around buying a house. So they believe and fall into these narratives and it keeps them where they are, you know, and the narratives are, and I see some of you commenting on the YouTube of this prices have to come down because nobody can afford a home. That is the narrative. Nobody can afford a home. Prices have to come down. I'm going to wait until all that happens. And the truth is, is that's how you get priced out of markets because you just sit and you just wait and then people can't afford homes and people buy homes. And then the economy gets a little better and prices go back up and you're sitting with nothing. And this happened in 2019. People were saying prices have to come down, right? And then look what happened in 2020. And so if you just sit there and you just believe your own story and that this is true and all the people you hang out with say the same thing, then you will just stay not owning a home and you will just watch prices continue to go up due to inflation. Yeah, that's a really good point. Listen, guys, prices are not going to go down next year, right? They're not. If you can show me why, then I'll agree with you. Just put it in the comments. The way prices go down is an oversupply or we start to see a foreclosure crisis or we start to see massive delinquents. And other than that, what would it be? So you have to go back to the fundamentals and just look at those are the things that drive prices down. An oversupply drives prices down. An indication of a lot of foreclosures or a lot of delinquents drive prices down. We are not seeing that. So you're going to sail into next year with, unfortunately, if you rinse and repeat one year later and you're sitting there waiting for prices to go down, I think that you're going to be sadly mistaken. Yeah, and that doesn't mean you couldn't see softening in some markets. And of course, there's going to be situations where you see a house that somebody gets a great deal on, right? And there are distressed sellers. Why not you, by the way? Seriously, why sit around and point to that? That's kind of the point. Danielle's actually going to be buying something here in Q1. I am. And I have a lot of people that I'm helping buy. I just got a woman a 10% discount on a home because the seller was distressed. And my whole thing is don't wait, negotiate. Don't say, oh my gosh, I can get this great deal on this house. But I think I actually could get a better deal if I wait. No, if you want a certain price, go ask for it and try to negotiate the price you want versus just sitting there. Let's define distress, right? Because I think there's different levels of distress of what people think distress is. In Danielle's case, the seller's distress was not that they didn't have a lot of equity. It's that it had been on the market a while. They had moved out. It was vacant. Of course, they've got some personal financial distress, but they have plenty of equity fall back on. Yeah, and honestly, with this particular person, their distress was they didn't want the hassle of running it. They could have just rented it because for what they bought it for, but they had money. They were moving to New York, and they didn't want the hassle. Yeah, so be careful when you say distress. Yeah, it's true. Because distress could be, or in my world, distress is the bank's knocking. Like, you know what I mean? That's distress. Right. The pre-foreclosure, foreclosure, delinquent on a payment, that's real distress. Distress, as you pen it, might be, I lost my job. Just that, I get it. That could be and would be stressful. However, if you have a ---- ton of equity in there, who cares? Like, you know what I mean? Okay, we're going to be fine because we can, that's basically like a savings account. Essentially, it is a savings account. It's just sitting in your home. And the question is, is do you want to access it or not, right? And then, in those kinds of circumstances, there are definitely going to be transactions, for sure. But it does not mean defaults. It does not mean crash. I've poured through this, guys. I've tried to, I've watched some of these Crash Bro guys, and I'm like, I have no clue where you get that data. Because, by the way, that's another thing. I showed Danielle something the other day. She's like, that's completely wrong. Yeah, they said home prices were down in Phoenix 30%. Yeah. And I was like, is this true? You know, I don't follow the single family like she does. And she's like, that is absolutely not true. Because I know in the little bubbles that I'm in, that's not true at all. Yeah. And realistically, you know, we were seeing a really, a much slower market, like April to August in Phoenix. And since August, when rates started to go down a little, things have picked back up. I mean, I just listed a house last weekend, and it sold in two days. So, I mean, for, you know, three grand under asking. So, like, you know, it's not. If you do look at the markets that are in distress, you know, let's just pick on some. Let's pick on Orlando. Let's pick on Austin. You know, let's pick on Phoenix. There are articles out there that are pretty slanted. However, Danielle's trading deals, you know, within inside of a week in that exact same market. So, thankfully, real estate is very sub-market driven. So, now, the article might not be completely BS, but you have to look at the bigger picture. Yeah. You always have to look at, you know, the bigger picture and the sub-markets. And, you know, in Florida, condos are in distress right now. Certain buildings, not all of them. Because, you know, they've got hit with these large HOA assessments because of the new rules in Florida. So, there's just all, you know, you have to really be nuanced about this. But if you just read headlines and believe everything's going to crash, and you're going to wait, you're more than welcome to do that. It's just not what the data is telling you. And I think that, you know, in 2026, we're going to keep having constrained inventory. You're going to see buyers slowly re-enter. And we're already seeing buyers slowly re-enter. I have clients that I was working with two years ago that decided to wait that are coming back up off the sidelines now because they want to start looking again. And, you know, the sellers are not going to be highly motivated to sell. So, the offer is going to have to be a realistic offer. And building will probably, you know, depending on the area, continue to build where it makes sense. You know? And I would just challenge you guys to look to our neighbor to the north. Like, Danielle and I have done some pretty extensive work by taking a look at what happened in Canada. And if you guys don't know, the average price of a home in Canada is in the mid-sevens. All the big cities like Toronto, Vancouver, they're well over a million on the average. So, how does that happen? And there's a bunch of factors as to why that's happened. The point, though, is that we are over 300,000 less on the average in our country. And so, if you're Canadian and you're coming to the U.S., it's a bargain. Right? And so, even though right now they don't particularly like us, but that's another story for another day. But the end of the day is you guys really need to start taking a look at, as you compare us with whatever you're comparing, compare it against other factors, right? And I think that, you know, I really believe that if whatever you jump on this year, we're buying, as you guys know, on the multifamily side. I have no issue buying on the single-family side at all. Depending on the market, obviously, you don't want to catch a falling knife either. You got to be diligent. There are deals out there. You got to be careful. You got to finance them right. You got to use real money down, whether it's yours or whether it's an investor. And all those things are certainly options for you. But I can't imagine that we're going to see a correction in 2026 of any kind. I think commercial is going to be bounced along the bottom, personally, this year in 2026. And I think it's going to come roaring back again. And why is that? That is specifically because of the exact same issue that's happening with single-family. We have a supply problem. So when rates went up, when inflation went up to 9.1 in 2022, and then the Fed reacted, and the rates started to go up in 22 and 23, people pulled back. They said, you know what? We're going to wait. We don't want to pay 8% or 9% for construction mortgage. So they stopped. And that created a supply problem. And we never really caught up from the 2008 stuff that we started off talking about. So we have a supply problem. And I love the way the CEO coined it. He just said, lower rates in 2026 are not going to correct the housing challenge, period. And I could not agree more. It just isn't going to get corrected with a little bit here and there. If you're a lender, good for you. You're going to definitely get some cash out refines. You're going to get some people to do things. It's not going back to the old way. These 5% and 6% rates, which I'm getting in the fives in multi-family, super normal. Very, very normal. These are normal rates. They're just not normal to somebody who started 10 years ago. And that's the real issue. Yeah. And the big conception here is that we've probably been through the worst of the housing market. The rates were almost 7% for most of this year. Buying was pretty frozen April through August, at least in this market. And the pain was the higher payments, fewer home selling, the slow growth. Collapsing prices wasn't part of that. And so now as we move into 2026, they're going to continue to lower rates. And yes, it will be slowly, but they're still going to do it. And more and more buyers are going to enter. We're already seeing this. The market's starting to pick up. We're already seeing this. You're not seeing concessions like you were on the offers. You're already seeing that. That's what the data is supporting. And so you have to wrap your mind around that, that the highest point of the pain probably passed in 2025. Yeah. And you can't have an affordability crisis and a price problem at the same time. You know what I mean? In other words, if there's an affordability problem, and there is, there can't be a crash. When have you ever seen an affordability issue and a crash? So what you have is you have people shifting from a single family over to rentals. And you guys know we've been talking about this for a while. That's the issue. The issue is that people don't have a choice like they used to. And I talk about my kids. Obviously, they're in their 20s. They're out of school now. And they have to have, gosh, $50,000 to $100,000 down just to be able to buy something. And so that's the hard part. And it's always been that way, though. I mean, as long as I can remember, people save to be able to buy a home. It's not instant. It's not just because rates are low. It's something that you work toward in a year or two years. But what we're going to see in the short term is we're going to see it's dramatically cheaper to rent than to buy right now when you add all the costs of owning. So what would those be? Those would be obviously any repairs and maintenance. Those would be insurance. Those would be property taxes. Those would be utilities. Those are all on the homeowner, not including the mortgage. Okay, on a rental side, right now rentals are getting beat up a little bit because of the massive supply of rentals that hit the market last year as a result that started from two, three years prior. And so there's all kinds of deals right now on the renter side. So that gap, the big gap between homeownership and renters is as big as I've ever seen it. And that has to come down. And when that starts to come down, then you'll start to see the affordability piece start to work again on the homes. Now, on the single families. Now, we all believe, Danilo and I have talked a lot about this, that this administration knows this. They're going to come out in Q1 with some, hopefully, some really, really, they're looking at all kinds of stuff. They're looking at, can you bring the mortgage with you, right? They're looking at a 50 or 40-year mortgage. They're looking at all these kinds of different things. They're looking at releasing federal lands for additional supply. But these all have lag issues. They're all lag issues. And so if this gets corrected, it's not going to show up to 2028. Trust me, it's going to take a couple years for this to work out. If somebody breaks ground on something, it's not even really open for a while. And then, of course, the supply, it takes a while for the supply to catch up. And we're severely behind. So we're still in a very supply-constrained market. It certainly is not going to get fixed anytime soon. And there's no distress. There's no forced selling. Yeah. And what you have to look at, too, is a lot of you are commenting, nobody can afford a home, because that really is a big narrative. It's true, actually. It's not just a narrative. It is true. A lot of people can't. But the truth is, this is part of a K-shaped economy. There are people that can afford homes. They're just at the upper end of the K. And that is what you have to wrap your head around, is that people can afford homes. People are buying homes. Parents are giving their kids money to buy homes. That's all happening right now. So people can't afford to buy homes. It's just that you have to put yourself in a position to be able to afford to buy a home. Because as we talked about on our episode a few weeks ago, home ownership will be a big driver on what side of the K you're on moving forward in this economy. Yeah. And then I'll just leave you with this, too. One of the biggest issues in the CPI, the Consumer Price Index, one of the biggest components, I should say, is actually housing. And so what does that actually mean? So it's called owner's equivalent rent. Owner's equivalent rent. And of course, the costs. We're heading into 2026 where rents are going to be flat. I've told my entire company, don't really try to get huge rent growth. Just keep the tenants that you have. And if you have to renew them at yesterday's rates, renew them at yesterday's rates, we should be focusing on occupancy and cash flow, not necessarily on trying to maximize rents next year. That's the narrative that we gave to our whole company. And why is that important? That's important because inflation, rent growth shows up in inflation. And you're not going to see rent growth next year like you have in the last few years. Now, you didn't see it much this year, which is very interesting. And here we are at the end of the year. But we did see some inflation, which really made me lip my eyebrows and go, what is going on here? Because we didn't see a lot of rent inflation, but that means that there was inflation from some other things. But one thing for sure, you're not going to see it in rent. Yep. And if you're still waiting for the crash that didn't come, then you might miss opportunities that are currently available. So you really have to wrap your mind around that. Yeah. Just follow the data, guys. Seriously. Just take a look at the supply constraint issues. Maybe start looking, maybe go look for an alternative viewpoint, right? So if you're watching something and you're completely convinced and you're looking, this is what I do. I watch some of these crash pros and I pull them up and I show it to Neil. And then we do our own research based on theirs. And oftentimes, if not most of the time, we can't find that data. We can't find what's happening here. How can they be so different? And by the way, usually it's sourced at the bottom. So we're going back to the sources. We don't even find it there. So don't just take a 10-minute, 15-minute video for granted and say, oh, this is the way it is because you have to dig. You have to trust but verify. Yep. Absolutely. See you guys next week and have a great holiday. Cheers, guys.