Well done extremely knowledgeable conversation one of the few guest in the country that can really explain the situation. Thank you being in loss mitigation nationally for the PMI business as well as being a large private investor what she is telling you is completely accurate thanks again.🍀🇺🇸🩷👏
Truly outstanding. Penetrating and uber relevant questions from the Boyd Institute team meets the unparalleled data-driven expertise and refreshing candor of Melody Wright. What a recipe for a truly eye-opening dialogue. Thank you all so much.
Great insights. Just adding that empty offices and donut cities could be an inevitability. Meta was early with the metaverse but not entirely wrong in their thesis. If businesses can function well enough without office space can offer similar services to office-based buildings—the extra overhead of the office space will steal the lunch of the office-based business by being able to cut prices or reinvest in talent retention. And top tier talent continue to answer polls saying that they would pick a remote job with a slightly lower salary over working full time in office with a higher salary. Add to this AI employee reductions, and a poorly timed macro downturn and you have a recipe for commercial building investors cancelling Christmas, and office-dependant cities needing to replace their economic engines (office worker discretionary spending). RTO mandates, by needing to be mandated at all, proved that the utility of offices has largely been replaced in the minds of workers.
SUBJECT: Your “Worse Than 2008 / –50%” Call Is Not Supported by National Data
Hi Melody,
Your Newsweek comments arguing for a price correction “worse than 2008” and a near‑term 50% national decline are directionally right about rising stress, but far too extreme given what the national and micro data actually show. Affordability is historically poor and some high‑beta metros are already correcting, yet the conditions that preceded the GFC—credit excess, a large negative‑equity overhang, and a true inventory shock—are not present at national scale today.[1][2][3][4]
Where Your Concerns Are Valid
Affordability and valuations really are stretched. Payment‑to‑income ratios for new buyers are at or near multi‑decade highs once current mortgage rates are applied, and price‑to‑rent ratios have reverted toward mid‑2000s bubble levels in many metros. Real household incomes have not kept pace with post‑2020 home price gains, so the marginal buyer is clearly strained even if existing owners look stable on paper.[3][5]
You are also right that the weakness is uneven and often invisible in the headline indices. Markets like Austin, parts of the Mountain West, and segments of the Bay Area have already seen double‑digit peak‑to‑trough declines, with rising shares of listings cutting price and longer days on market. At a finer resolution, micro‑level tools like the Weiss Residential Index—which tracks price momentum at the individual‑home and neighborhood level using a repeat‑sales approach—show a growing share of properties with flat or negative 12‑month appreciation in certain boom‑and‑bust metros, confirming that cracks are spreading underneath still‑benign national aggregates.[6][7][8][9][1]
Where the “50% National Crash” Argument Fails
The national price series themselves are not behaving like the opening act of a systemic collapse. FHFA and Case‑Shiller still show national prices roughly flat to modestly positive year‑over‑year, and NAR’s median price remains slightly up versus a year ago, which is inconsistent with the early phase of a 50% nominal drawdown. In 2006–2007, these measures had already rolled over decisively before the credit system cracked; that pattern is not evident today.[10][11]
Credit quality is also nothing like 2006–2008. Household mortgage debt service ratios remain well below their pre‑GFC peak, negative equity is a small fraction of its 2009 level, and post‑crisis underwriting has pushed FICO scores on new originations to the strongest distributions in the modern data. Without exotic products, thin‑equity borrowers, and widespread speculative leverage, there is no obvious national mechanism to create the kind of forced‑selling wave required for a 50% nationwide nominal decline.[3]
The Median Price = Median Income Claim
Your suggestion that the median home price must “reset” toward the median household income implies a national price‑to‑income ratio near 1:1. That has never been the national norm in the United States; long‑run estimates place sustainable ratios closer to 2.5–3.5 times income, even in earlier decades with lower credit penetration and different demographics. A 50% national nominal drop from here would push valuations far below those historical ranges and would require a macro and credit shock that is simply not visible in the current labor‑market, banking‑system, or policy data.[12][1][3]
Housing Supply: Why 4 Months Means Something Different Today
Your focus on inventory and “frozen supply” is exactly where the nuance is, and this is the one area where today’s signals are both more subtle and, in some places, more dangerous than they were in prior cycles. A 4‑month supply in 2025 is not directly comparable to 4 months in, say, 2002 or 2006—but that cuts against a guaranteed 50% crash as much as it supports localized air pockets.
THE CASE FOR YOUR WORRY: WHY 4 MONTHS CAN BE MORE DANGEROUS THAN IT LOOKS
A. Rate‑lock and frozen inventory
Tens of millions of owners refinanced into 2–4% fixed‑rate mortgages; moving requires re‑levering at roughly 6–7%, often for a smaller or equivalent home. That suppresses listings and keeps reported inventory low, but the tightness is engineered by financing conditions, not by a genuine abundance of willing buyers relative to potential sellers.[4][3]
B. Shadow supply outside standard listing counts
Traditional “active listings” miss homes that would be on the market in a normal rate environment but are being held back by owners waiting for either lower rates or higher prices. Builders report pockets of elevated completed‑but‑unsold units, especially in some Sunbelt and exurban projects, and investor‑owned single‑family rentals can return as supply if cap rates rise and refinancings become more punitive.[5][6][3]
Micro tools like the Weiss Residential Index are helpful here: they show neighborhood‑level price momentum turning negative in some of these same overbuilt or investor‑heavy pockets even while metro‑level indices remain positive, suggesting that latent supply pressure is more advanced locally than the national data would imply.[7][8]
C. Collapsing sales volume distorts “months’ supply”
Months of supply is defined as active inventory divided by the current sales pace, and existing‑home sales volumes remain well below pre‑pandemic norms. That means 4–5 months of supply at today’s depressed transaction pace can coexist with a much looser underlying market than the same ratio would indicate in a high‑volume period, making the metric less reassuring than in past cycles.[13][4]
D. Investor‑heavy pockets can move abruptly
In several boom metros, investors accounted for a very large share of pandemic‑era purchases, often financed at institutionally low coupons. If funding conditions tighten further or portfolio rebalancing accelerates, those holdings can convert into listings quickly, producing local price air pockets that will not show up in national inventory statistics until after the move has begun.[14][6]
E. Demographic and rent dynamics weaken absorption
Household formation has slowed at the margin, and many would‑be first‑time buyers are stuck in high‑rent situations, constrained by student debt and tighter underwriting standards. That reduces the number of qualified buyers per listing, increasing vulnerability to shocks even when top‑line months‑supply data look “normal.”[3]
On these dimensions, your concern that today’s reported 4‑month inventory could mask a more fragile market structure—particularly in specific metros—is well grounded.
THE CASE AGAINST YOUR 50% CALL: WHY 4 MONTHS STILL DOESN’T SUPPORT A NATIONAL CRASH
A. Historical crashes featured much higher visible supply
During 2007–2009, existing‑home months’ supply surged into the 10–11 range nationally, and new‑home supply rose even higher as builders delivered into collapsing demand. The United States is currently around 4–5 months for existing homes, which is closer to balanced‑to‑slightly‑loose rather than crisis levels, even after adjusting for weaker sales volumes.[4][5][13]
B. A genuine unit shortfall remains
Multiple independent estimates still point to a cumulative underbuild of several million housing units over the last decade, as construction lagged population and household formation after the GFC. That physical scarcity of shelter stock is a real floor under prices, absent a nationwide flood of distressed or forced‑sale inventory.[3]
C. Rate‑lock also suppresses forced selling
The same rate‑lock effect that “freezes” potential sellers also protects the downside by keeping actual debt‑service burdens low and predictable for most owners. Unlike 2006–2008, there is no large wave of mortgages scheduled to reset to unpayable payments in the next couple of years.[4][3]
D. No evidence of a construction glut
Housing starts and completions are near long‑run norms rather than at bubble‑era peaks, and builders have mostly managed spec inventory cautiously after the pandemic boom. There is no national overbuilding comparable to the mid‑2000s that could on its own drive a 50% nominal price correction.[5][3]
E. Micro stress ≠ macro collapse
Weiss and other granular datasets are excellent early‑warning systems for neighborhood‑level turning points, but by design they are strongest as cross‑sectional risk maps, not as single national price paths. A rising share of homes with negative momentum in specific counties or ZIP codes does not statistically require, or even strongly imply, a synchronized 50% nominal drawdown across the entire U.S. housing stock.[11][15][7][10]
Taken together, the supply picture is more complex and, in some pockets, more fragile than pre‑GFC rule‑of‑thumb thresholds like “4 months is safe” would suggest—but it still falls far short of the conditions that historically accompanied 50% national price declines.
A More Plausible Path
A more realistic base case is a multi‑year, uneven adjustment: flat to mid‑single‑digit nominal declines nationally, larger real declines once inflation is considered, and 20–40% peak‑to‑trough drawdowns in the most overextended, investor‑heavy, or income‑constrained metros. That would be painful and politically salient without being “worse than 2008” in either magnitude or systemic risk.[14][3]
If you have quantitative evidence of an imminent national foreclosure wave, a break in mortgage funding channels, or a clearly identified mechanism that would turn the localized micro stress picked up by Weiss into a synchronized 50% nominal decline, it would be valuable to see that model. Absent that, the best read of FRED, FHFA, Case‑Shiller, NAR, Weiss, and private‑sector datasets is that your stress call is directionally right—but your “worse than 2008 / –50% nationwide” framing is far ahead of what the data presently justify.[16][6][10][11][3]
Well done extremely knowledgeable conversation one of the few guest in the country that can really explain the situation. Thank you being in loss mitigation nationally for the PMI business as well as being a large private investor what she is telling you is completely accurate thanks again.🍀🇺🇸🩷👏
Truly outstanding. Penetrating and uber relevant questions from the Boyd Institute team meets the unparalleled data-driven expertise and refreshing candor of Melody Wright. What a recipe for a truly eye-opening dialogue. Thank you all so much.
Thank you so much. Unbelievably kind. ❤️
Great insights. Just adding that empty offices and donut cities could be an inevitability. Meta was early with the metaverse but not entirely wrong in their thesis. If businesses can function well enough without office space can offer similar services to office-based buildings—the extra overhead of the office space will steal the lunch of the office-based business by being able to cut prices or reinvest in talent retention. And top tier talent continue to answer polls saying that they would pick a remote job with a slightly lower salary over working full time in office with a higher salary. Add to this AI employee reductions, and a poorly timed macro downturn and you have a recipe for commercial building investors cancelling Christmas, and office-dependant cities needing to replace their economic engines (office worker discretionary spending). RTO mandates, by needing to be mandated at all, proved that the utility of offices has largely been replaced in the minds of workers.
SUBJECT: Your “Worse Than 2008 / –50%” Call Is Not Supported by National Data
Hi Melody,
Your Newsweek comments arguing for a price correction “worse than 2008” and a near‑term 50% national decline are directionally right about rising stress, but far too extreme given what the national and micro data actually show. Affordability is historically poor and some high‑beta metros are already correcting, yet the conditions that preceded the GFC—credit excess, a large negative‑equity overhang, and a true inventory shock—are not present at national scale today.[1][2][3][4]
Where Your Concerns Are Valid
Affordability and valuations really are stretched. Payment‑to‑income ratios for new buyers are at or near multi‑decade highs once current mortgage rates are applied, and price‑to‑rent ratios have reverted toward mid‑2000s bubble levels in many metros. Real household incomes have not kept pace with post‑2020 home price gains, so the marginal buyer is clearly strained even if existing owners look stable on paper.[3][5]
You are also right that the weakness is uneven and often invisible in the headline indices. Markets like Austin, parts of the Mountain West, and segments of the Bay Area have already seen double‑digit peak‑to‑trough declines, with rising shares of listings cutting price and longer days on market. At a finer resolution, micro‑level tools like the Weiss Residential Index—which tracks price momentum at the individual‑home and neighborhood level using a repeat‑sales approach—show a growing share of properties with flat or negative 12‑month appreciation in certain boom‑and‑bust metros, confirming that cracks are spreading underneath still‑benign national aggregates.[6][7][8][9][1]
Where the “50% National Crash” Argument Fails
The national price series themselves are not behaving like the opening act of a systemic collapse. FHFA and Case‑Shiller still show national prices roughly flat to modestly positive year‑over‑year, and NAR’s median price remains slightly up versus a year ago, which is inconsistent with the early phase of a 50% nominal drawdown. In 2006–2007, these measures had already rolled over decisively before the credit system cracked; that pattern is not evident today.[10][11]
Credit quality is also nothing like 2006–2008. Household mortgage debt service ratios remain well below their pre‑GFC peak, negative equity is a small fraction of its 2009 level, and post‑crisis underwriting has pushed FICO scores on new originations to the strongest distributions in the modern data. Without exotic products, thin‑equity borrowers, and widespread speculative leverage, there is no obvious national mechanism to create the kind of forced‑selling wave required for a 50% nationwide nominal decline.[3]
The Median Price = Median Income Claim
Your suggestion that the median home price must “reset” toward the median household income implies a national price‑to‑income ratio near 1:1. That has never been the national norm in the United States; long‑run estimates place sustainable ratios closer to 2.5–3.5 times income, even in earlier decades with lower credit penetration and different demographics. A 50% national nominal drop from here would push valuations far below those historical ranges and would require a macro and credit shock that is simply not visible in the current labor‑market, banking‑system, or policy data.[12][1][3]
Housing Supply: Why 4 Months Means Something Different Today
Your focus on inventory and “frozen supply” is exactly where the nuance is, and this is the one area where today’s signals are both more subtle and, in some places, more dangerous than they were in prior cycles. A 4‑month supply in 2025 is not directly comparable to 4 months in, say, 2002 or 2006—but that cuts against a guaranteed 50% crash as much as it supports localized air pockets.
THE CASE FOR YOUR WORRY: WHY 4 MONTHS CAN BE MORE DANGEROUS THAN IT LOOKS
A. Rate‑lock and frozen inventory
Tens of millions of owners refinanced into 2–4% fixed‑rate mortgages; moving requires re‑levering at roughly 6–7%, often for a smaller or equivalent home. That suppresses listings and keeps reported inventory low, but the tightness is engineered by financing conditions, not by a genuine abundance of willing buyers relative to potential sellers.[4][3]
B. Shadow supply outside standard listing counts
Traditional “active listings” miss homes that would be on the market in a normal rate environment but are being held back by owners waiting for either lower rates or higher prices. Builders report pockets of elevated completed‑but‑unsold units, especially in some Sunbelt and exurban projects, and investor‑owned single‑family rentals can return as supply if cap rates rise and refinancings become more punitive.[5][6][3]
Micro tools like the Weiss Residential Index are helpful here: they show neighborhood‑level price momentum turning negative in some of these same overbuilt or investor‑heavy pockets even while metro‑level indices remain positive, suggesting that latent supply pressure is more advanced locally than the national data would imply.[7][8]
C. Collapsing sales volume distorts “months’ supply”
Months of supply is defined as active inventory divided by the current sales pace, and existing‑home sales volumes remain well below pre‑pandemic norms. That means 4–5 months of supply at today’s depressed transaction pace can coexist with a much looser underlying market than the same ratio would indicate in a high‑volume period, making the metric less reassuring than in past cycles.[13][4]
D. Investor‑heavy pockets can move abruptly
In several boom metros, investors accounted for a very large share of pandemic‑era purchases, often financed at institutionally low coupons. If funding conditions tighten further or portfolio rebalancing accelerates, those holdings can convert into listings quickly, producing local price air pockets that will not show up in national inventory statistics until after the move has begun.[14][6]
E. Demographic and rent dynamics weaken absorption
Household formation has slowed at the margin, and many would‑be first‑time buyers are stuck in high‑rent situations, constrained by student debt and tighter underwriting standards. That reduces the number of qualified buyers per listing, increasing vulnerability to shocks even when top‑line months‑supply data look “normal.”[3]
On these dimensions, your concern that today’s reported 4‑month inventory could mask a more fragile market structure—particularly in specific metros—is well grounded.
THE CASE AGAINST YOUR 50% CALL: WHY 4 MONTHS STILL DOESN’T SUPPORT A NATIONAL CRASH
A. Historical crashes featured much higher visible supply
During 2007–2009, existing‑home months’ supply surged into the 10–11 range nationally, and new‑home supply rose even higher as builders delivered into collapsing demand. The United States is currently around 4–5 months for existing homes, which is closer to balanced‑to‑slightly‑loose rather than crisis levels, even after adjusting for weaker sales volumes.[4][5][13]
B. A genuine unit shortfall remains
Multiple independent estimates still point to a cumulative underbuild of several million housing units over the last decade, as construction lagged population and household formation after the GFC. That physical scarcity of shelter stock is a real floor under prices, absent a nationwide flood of distressed or forced‑sale inventory.[3]
C. Rate‑lock also suppresses forced selling
The same rate‑lock effect that “freezes” potential sellers also protects the downside by keeping actual debt‑service burdens low and predictable for most owners. Unlike 2006–2008, there is no large wave of mortgages scheduled to reset to unpayable payments in the next couple of years.[4][3]
D. No evidence of a construction glut
Housing starts and completions are near long‑run norms rather than at bubble‑era peaks, and builders have mostly managed spec inventory cautiously after the pandemic boom. There is no national overbuilding comparable to the mid‑2000s that could on its own drive a 50% nominal price correction.[5][3]
E. Micro stress ≠ macro collapse
Weiss and other granular datasets are excellent early‑warning systems for neighborhood‑level turning points, but by design they are strongest as cross‑sectional risk maps, not as single national price paths. A rising share of homes with negative momentum in specific counties or ZIP codes does not statistically require, or even strongly imply, a synchronized 50% nominal drawdown across the entire U.S. housing stock.[11][15][7][10]
Taken together, the supply picture is more complex and, in some pockets, more fragile than pre‑GFC rule‑of‑thumb thresholds like “4 months is safe” would suggest—but it still falls far short of the conditions that historically accompanied 50% national price declines.
A More Plausible Path
A more realistic base case is a multi‑year, uneven adjustment: flat to mid‑single‑digit nominal declines nationally, larger real declines once inflation is considered, and 20–40% peak‑to‑trough drawdowns in the most overextended, investor‑heavy, or income‑constrained metros. That would be painful and politically salient without being “worse than 2008” in either magnitude or systemic risk.[14][3]
If you have quantitative evidence of an imminent national foreclosure wave, a break in mortgage funding channels, or a clearly identified mechanism that would turn the localized micro stress picked up by Weiss into a synchronized 50% nominal decline, it would be valuable to see that model. Absent that, the best read of FRED, FHFA, Case‑Shiller, NAR, Weiss, and private‑sector datasets is that your stress call is directionally right—but your “worse than 2008 / –50% nationwide” framing is far ahead of what the data presently justify.[16][6][10][11][3]
Happy to chat should you care to discuss.
Have a nice Thanksgiving!
Best,
Lester Firstenberger, Esq.