Why the housing market isn’t a bubble

The puzzle

Yes, prices are higher than in 2006… even after inflation.

This is why so many would-be buyers think it’s a bubble, and I don’t blame them. After inflation, US home prices are — above their 2006 peak, and Milwaukee is — above its own. They’re way above the old trend line too. Not ideal! But high prices alone don’t make a bubble. A bubble has to be held up by something that can vanish, like easy credit. A shortage of homes can’t vanish overnight. Prices can still cool as they drift back toward what buyers can afford, but that looks very different from a crash.

How far above trend? From 1980 to 2000, prices rose about — a year faster than inflation. Today they’re about — above that long-run trend. The crash only knocked prices back to the line, and more than half of today’s gap opened after 2019, with the shortage and record-low rates in 2020 and 2021.

Another bubble test: buying vs. renting. The price-to-rent ratio is — above its 1983 to 1999 norm, close to the — of the 2006 peak (it briefly passed that in 2022). The difference is direction. In 2005 the gap was still growing fast. Since — the ratio has fallen — as rents kept rising while prices stalled. Milwaukee hasn’t turned yet.

Why prices are high, 1 of 2

2008 had too many houses. Now we don’t have enough.

Same with great TV: in 2008, Mad Men, Breaking Bad, The Wire, 30 Rock and The Office were all on the air at once.

Housing scarcity can be summed up in a nutshell: Before the bubble, the US approved about — homes a year; since 2008 it’s averaged — – roughly — of that pace – while the number of households has grown nearly 30% since 2001. That’s like hosting Thanksgiving for a bigger family every year and buying a smaller Tofurky (Vegan alert). Milwaukee never had much of a boom to come down from, and since 2008 it has built at about — of its early-2000s pace. Compared with that pre-bubble pace, that adds up to roughly — homes across the US that never got built, including about — in the Milwaukee metro. So, no glut: just — of owner homes sit empty and for sale, against — in early 2008.

Why prices are high, 2 of 2

The 3% mortgage is the new golden handcuffs

I know because I’m shackled myself.

If you locked in a 3% mortgage in 2021 like me, you already know this one. About half of US mortgages (—) carry a rate under 4%, and nearly one in five is under 3%. A new 30-year loan averaged — this summer, and it has climbed above 7% this fall. Moving would mean trading a great deal for a much worse one, so people stay put – and the homes they’d have sold never hit the market. Wisconsin owners are even more locked in: — are under 4%. For buyers, that means fewer homes to choose from and more competition for each one.

Why it won’t pop, 1 of 3

Today’s loans are a lot more stable

That’s good for all of us. The Big Short 2 will have to wait.

Remember “NINJA” loans: no income, no job, no assets? This is what their absence looks like. In 2006, — of new mortgage dollars went to borrowers with shaky credit (under 620, the usual subprime line). In 2025 it was —. The typical new borrower scored — out of 850 at the end of 2025, against — at the end of 2006. And only — of mortgages have a rate that can adjust, so almost nobody’s payment is about to reset higher – the thing that sank a lot of owners last time.

Good news first: most buyers don’t put 20% down. In 2025, — of US home-purchase loans came with less than 20% down, the same share as in 2006 (—), and in Wisconsin it was —.

What changed is how those loans get made, and this one’s personal, since I spent 12 years in mortgage insurance. In 2006, a lot of buyers skipped mortgage insurance by taking out a second “piggyback” loan to cover the down payment, and — of regular, non-government loans had less than 5% down. In 2025 it was —. Today, low-down-payment buyers mostly use government-backed FHA or VA loans, or a regular loan with private mortgage insurance. That insurance covers the lender if you stop paying, so a second company checks that you can actually afford it.

Why it won’t pop, 2 of 3

Owners have a thick equity cushion

So almost no one is underwater. In 2008, millions were.

After what they owe, homeowners now own — of their homes’ value. In early 2012 it was —. Here’s why that matters: if you owe more than the house is worth and lose your job, you can’t sell your way out, and that’s how a layoff becomes a foreclosure. Today just — of US mortgages are underwater. In early 2013, the earliest this data goes, it was —. In Wisconsin it rounds to zero, which tracks for a state that never really did the boom in the first place.

Why it won’t pop, 3 of 3

People are paying their mortgages on time

At the worst of the crisis, — of US mortgage debt was three or more months behind. Now it’s —. About — people got a new foreclosure in the second quarter of 2009; this spring it was —. In the Milwaukee metro, the share of mortgages seriously late or in foreclosure peaked at — at the end of 2010. Today it’s —.

Why it won’t pop, the recap

No forced sellers, no crash

Remember the forced sellers? This is where it usually clicks for my friends “waiting for the bubble to burst.” 2008 had a conveyor belt of them: prices dipped, owners went underwater, payments reset, banks foreclosed, and the foreclosures pushed prices down again. Today that conveyor belt is mostly empty. People with equity and a payment they can afford don’t have to sell, so a weak market just gets… quiet. Fewer sales, flat prices, no fire sale.

The honest part

OK, so what are the warning signs?

I’m not saying housing is risk-free – just that the risk moved, from shaky loans to stretched budgets. Builders have more unsold new homes than usual, a bigger share of credit card balances is going seriously late than before the pandemic, and buy now, pay later is growing in a corner credit reports barely see: — of adults used it last year, and — of them paid late at least once, up from — in 2021. Unemployment is higher than in 2023, though it has eased a little this year, and Milwaukee is still below the national rate.

If you’re buying right now, you’re feeling the worst of it. With 20% down, the payment on a typical $— US home takes — of average household income, about 1.5x what it was in 2019 (—), and not far from mid-2006’s —. With 5% down, like many first-time buyers, it’s —: about — a month in principal and interest plus — for mortgage insurance, before taxes and homeowners insurance. At October’s 7.3% rate it would be about 17%, nearly the 2006 level. That’s a slow squeeze, not a wave of foreclosures.

The worst case

If it goes wrong, expect a slow leak

Think week-old party balloon, not a pin.

Waiting for a crash is also a long bet. Even in 2008, with forced sellers everywhere, US prices took about — years to hit bottom, and they fell — in dollars. Anyone who waited for the bottom waited that long, paying rent the whole time, and prices were back above the old peak by —. Milwaukee fell — over about — years.

The leak may already have started. Since mid-2024, US prices are up — in dollars but only — after inflation. That is how a stretched market often cools: prices stop outrunning everything else and drift for years instead of dropping. Milwaukee, where building has lagged the most, is still climbing, up — after inflation over the same stretch.

For first-time buyers

So what do I do?

Asking for all my friends.

I’m not your loan officer, but here’s what the data says if you’re trying to buy:

• Don’t plan around a crash. Even 2008, the worst housing crash in modern memory, took about — years to bring prices down —.
• Watch the payment, not just the price. On a typical home with 5% down, a 1-point drop in mortgage rates cuts principal and interest by about — a month: — at this spring’s — rate, — at —.
• You probably don’t need 20% down. Most buyers don’t put that much down. Mortgage insurance or an FHA loan adds to the monthly cost, but it can get you in the door sooner.
• Look where the supply is. Builders are sitting on more unsold new homes than usual, so new construction may be where there’s room to negotiate.
• In Milwaukee, don’t expect prices to fall first. Building here has lagged the most, and prices are still climbing after inflation, up — since mid-2024.