{"id":556278,"date":"2026-03-31T14:31:10","date_gmt":"2026-03-31T14:31:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/556278\/"},"modified":"2026-03-31T14:31:10","modified_gmt":"2026-03-31T14:31:10","slug":"is-u-s-housing-starting-to-crash","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/556278\/","title":{"rendered":"Is U.S. Housing Starting to Crash?"},"content":{"rendered":"

There seems to have been a vibe shift in the U.S. housing market over the past six months. What started in places like Austin, Texas with falling rents and home prices<\/a>, seems to have spread to other parts of the country. As you can see in the table below, it\u2019s not just Austin that has experienced double-digit rent declines since 2022:<\/p>\n

\"Top<\/a><\/p>\n

And what has happened in the rental market seems to be occurring to home prices as well. Analysis from Residential Club shows<\/a> that 75% of the largest metro areas in the U.S. saw inflation-adjusted home price declines over the last year.<\/p>\n

But will this trend continue? And what might we expect from U.S. housing over the next few years? Let\u2019s dig in.<\/p>\n

Rates Aren\u2019t the Problem Anymore<\/p>\n

When we talk about U.S. housing, the first thing we need to address is affordability. After all, if people can\u2019t afford houses, they don\u2019t buy them.<\/p>\n

The big issue with affordability, as you likely already know, is that incomes haven\u2019t risen in line with mortgage payments. In fact, you need nearly twice as much income today to afford the typical U.S. home compared to before COVID:<\/p>\n

\"Income<\/a><\/p>\n

Part of this problem is that 30-Year mortgage rates more than doubled from the early 2020s. But, 30-Year mortgage rates were an outlier (on the low side) from 2010 through the early 2020s:<\/p>\n

\"US<\/a><\/p>\n

So seeing them revert back to their historical norm today isn\u2019t all that surprising.<\/p>\n

But what hasn\u2019t reverted back to its historical norm? Prices.<\/p>\n

As the chart below illustrates, the inflation-adjusted Case Shiller Home Price Index is higher today than it was during the 2000s Housing Bubble<\/a>:<\/p>\n

\"U.S.<\/a><\/p>\n

This suggests that, all else equal, prices are the problem, not rates.<\/p>\n

Thankfully for homebuyers, prices have started to slow (and even decline in real terms) over the past few years. You can see this by looking at the annual nominal returns of U.S. housing from 2020-2025 (h\/t Ben Carlson<\/a>):<\/p>\n

\"U.S.<\/a><\/p>\n

U.S. housing saw a negative return (after inflation) in 2025. This might just be the beginning too. As Reuters recently reported, new home sales dropped by 17.6% in January 2026<\/a>, the lowest level since October 2022.<\/p>\n

This is occurring as the number of homebuyers in the market reaches a record low:<\/p>\n

\"Homebuyers<\/a><\/p>\n

And as home-purchase cancellations reach a record high:<\/p>\n

\"Home<\/a><\/p>\n

People aren\u2019t buying, or they are reconsidering buying, as prices begin to creep downward.<\/p>\n

And I believe that prices can continue to creep downward for one simple reason\u2014home equity.<\/p>\n

There\u2019s Room to Fall<\/p>\n

The main reason why home prices can continue to decline is that homeowners have record levels of home equity:<\/p>\n

\"American<\/a><\/p>\n

And a good portion of this home equity\u00a0was created in the last few years (as the chart above illustrates). As a result, homeowners won\u2019t feel the sting of home price declines as badly as they normally would. We can prove this with a simple example.<\/p>\n

Imagine you bought a house for $100,000 (and all houses cost $100,000). Now imagine that all home prices doubled to $200,000. Have you gained anything? Relative to non-homeowners, you have. But relative to other homeowners, you are no different. If you sold your $200,000 house and bought another one, it would cost you $200,000. Nothing gained, nothing lost.<\/p>\n

Now imagine that all home prices then dropped to $175,000. Have you lost anything? Relative to homeowners, you haven\u2019t. You sell your $175,000 house and buy another one for the same price.<\/p>\n

This is a simplified version of what happened to U.S. homeowners over the past few years. They gained a lot of home equity (on paper) that hasn\u2019t translated into any real difference in their lives. So, if that home equity were to decline somewhat (in aggregate), there would be very little impact on them. Outside of imagining what they could\u2019ve had (aka selling at the top), they haven\u2019t lost much.<\/p>\n

But there\u2019s another side to this. Homeowners with large equity cushions can actually afford to cut their asking price and still walk away with a profit. This makes it more likely that they reduce their price compared to someone with far less equity.<\/p>\n

Nevertheless, it won\u2019t feel that way. Especially because housing makes up such a large portion of overall wealth. Among U.S. households with $1M-$5M, housing comprises around 30%-40% of their net worth:<\/p>\n

\"Asset<\/a><\/p>\n

As a result, many of these households will fight tooth and nail to hold onto this home equity, even if it\u2019s just on paper.<\/p>\n

Of course, this assumes that these homeowners have the luxury of holding out. If the economy deteriorates and people are forced to sell\u2014due to job loss or other financial distress\u2014equity cushions matter far less.<\/p>\n

Either way, this fight is going to play out over the next few years.<\/p>\n

Housing Remains Slow\u2026and Local<\/p>\n

I don\u2019t claim to be an expert on U.S. housing, but one thing I know for sure is that home prices move much slower than other asset classes. While U.S. equities bottomed in March 2009 (during the Global Financial Crisis), U.S. housing didn\u2019t hit its lows until 2012, over 3 years later.\u00a0<\/p>\n

I suspect that the same thing will occur with U.S. housing over the next few years. Why? Because it\u2019s going to take time for people to update their beliefs and face reality. They will need to accept that their home isn\u2019t selling because of the listing description, the photos, or even their agent. It\u2019s not selling because of the price. Once this becomes common knowledge, then the U.S. housing market will start picking up once again.<\/p>\n

Of course, this won\u2019t happen everywhere. In San Francisco and New Jersey (my home market), I\u2019ve seen recent examples<\/a> where homes were getting multiple offers and selling above ask. These areas may not experience the same \u201cbelief revision\u201d that the rest of the country will likely go through.<\/p>\n

Regardless of what happens, the housing market remains local. This is the most important thing to keep in mind as homebuyer (or seller) in the near future. Housing is a complex asset class where averages can mask what\u2019s really going on. For example, one neighborhood could see prices plummeting while another nearby remains strong.<\/p>\n

This is why you have to do your homework and understand your target market. I\u2019m generally not a fan of market timing when it comes to buying income-producing assets. But when it comes to housing (which I consider a consumption good), price matters a lot. Not only is it likely to be the biggest financial decision of your life, but it\u2019s an un-diversified one at that.<\/p>\n

So, do your homework, stay informed, and buckle up. If you\u2019re a buyer, time is on your side for the first time in many years.<\/p>\n

Thank you for reading!<\/p>\n

If you liked this post, consider signing up for my newsletter<\/a>.<\/p>\n

This is post 496. Any code I have related to this post can be found here with the same numbering: https:\/\/github.com\/nmaggiulli\/of-dollars-and-data<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"There seems to have been a vibe shift in the U.S. housing market over the past six months.…\n","protected":false},"author":2,"featured_media":556279,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101],"class_list":["post-556278","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/556278","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=556278"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/556278\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/556279"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=556278"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=556278"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=556278"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}