U.S. in ‘biggest housing bubble of all-time,’ housing expert says

America’s housing affordability crisis is being fueled by a massive bubble that has grown out of control since the pandemic.

According to Nick Gerli, founder and CEO of housing data analytics firm Reventure App, the U.S. is “in the biggest housing bubble of all time.”

“Inflation-adjusted home prices today are almost 100% higher than the long-term, 130-year average,” he said, adding that the only other time in history this happened was just before the 2008 housing market crash.

Between 1890 and 2000, “home prices were closely linked to inflation and never entered a national bubble,” said Gerli, who warned that “this situation is not sustainable.”

The problem isn’t just elevated prices—it’s how quickly prices have increased relative to wages. “We’re at a record disconnect between wages and home prices, with wage growth decelerating fast,” Gerli explained.

At this rate, Gerli said the only two options are for home prices to crash or for inflation to rise out of control. The latter option is harder to imagine because it would lead to a spike in interest rates, making housing affordability even worse.

Although Gerli strongly suggested that housing prices will eventually crash, economists don’t expect this scenario to play out anytime soon. Ironically, they believe that the 2008 housing meltdown prevented another crisis from happening today.

Economists don’t buy the ‘housing crash’ narrative

America isn’t headed for a housing market crash because there simply isn’t enough supply available—a trend that goes back to the 2008 financial crisis.

Based on “the economics of supply and demand, if there’s a shortage, prices simply cannot crash,” said Lawrence Yun, the chief economist of the National Association of Realtors.

Although estimates vary, Realtor.com believes the U.S. housing shortage is between 2.3 million and 6.5 million units. Zillow says the shortage is closer to 4.5 million units.

“I would worry if there was an oversupply and if we were in a job-cutting recession, but that’s not the case today,” said Yun.

CoreLogic chief economist Selma Hepp agrees, claiming that home prices won’t crash “unless there is a significant surge in the rate of unemployment, which is currently not in the forecast.”

Although unemployment has risen sharply over the past year, the economy isn’t experiencing deep job cuts that would trigger foreclosures and declining housing demand.

Economists are also confident that falling mortgage rates will lead to a more balanced housing market by improving affordability and creating higher demand from sidelined buyers.

Zillow’s senior economist, Orphe Divounguy, said home-price growth is expected to slow over the next year, averaging 2% in 2024 and just 1% by June 2025.

“That’s a healthy sign that the market is becoming more balanced,” Divounguy said, adding that market conditions mean “very few people face mortgage delinquency and would find themselves having to walk away from their homes.”