Dear Reader,

Millions of Americans are waiting for the housing crash so they can finally buy.

And I get it.

For many people, housing feels impossible right now.

Prices are high, mortgage rates are painful, and monthly payments look ridiculous compared to just a few years ago.

So the instinct to “wait for a crash” is logical.

But here’s a question most people aren’t prepared for:

What if the Housing Crash Has Already Happened?

When most people think of a housing crash, they naturally think back to 2008.

But that was a true outlier…

A “Black Swan” event created by the combination of handout politics, misunderstood derivatives, and clueless rating agencies.

Expecting every housing crash to look like 2008 – is like expecting every bear market to look like the Dot-Com bust.

It doesn’t make sense.

For instance, the 2022 bear market saw a peak-to-trough drawdown in the S&P 500 of about 25%.

That’s about half of the maximum drawdown that occurred during the Dot-Com bust.

Does that mean that 2022 wasn’t a “real” bear market? Of course not.

And if we look at the data for housing prices…

We can see that the decline in prices is now roughly about half that of the 2008 crash.

The median sales price of houses sold in the U.S. peaked at $442,600 in Q4 2022.

By Q1 2026, it had fallen to $403,200 – about a 9% decline.

Whereas in Q1 2007, the median sales price was $257,400, and then fell to $208,400 by Q1 2009 – about a 20% decline.

So the current housing downturn has already produced a real price correction – just not nearly as severe as 2008.

And if we look at the chart for existing home sales, we can see that the activity pattern has actually played out in a very similar way.

After the pandemic boom, existing home sales have fallen right back into the same downturn zone we saw during the last housing crash.

So if you define a housing crash by transaction volume, this crash has already happened.

It’s just that the drop in prices was not as stark as back then.

But this brings up a more useful question…

Why Has a Sales Collapse Only Produced a Modest Price Decline?

That answer is important, because it tells you why waiting for another 2008 may be a mistake.

This time, the market structure is different.

Back then, forced sellers were everywhere.

Homeowners were overleveraged. Adjustable-rate mortgages were resetting. Defaults were rising. Banks were foreclosing.

In other words, supply was getting dumped onto the market by people who had no real choice.

That is how a big housing crash happens…

When owners are forced to sell into a market that doesn’t have enough buyers.

Today, that forced-selling machine is largely missing.

Around 40% of U.S. homeowners do not even have a mortgage.

Think about that for a second.

If you own your home outright, rising mortgage rates do not force you out.

You may not like the economy.

You may not like property taxes.

You may not like watching your home value drift lower on paper.

But unless something extreme happens, you can just sit there and wait.

Then look at the people who do have mortgages.

A majority of active U.S. mortgage holders – 51.5% – still have rates under 4%.

That includes 21.9% with rates below 3% and 29.6% with rates between 3% and 4%.

And with the 30-year fixed mortgage rate currently standing at about 6.5%...

That means at least 80% of active U.S. mortgage holders have rates significantly below the current rate.

If they sell, they’ll probably have to buy somewhere else – with a much higher monthly payment.

Renting may not help either, because rents have gone up too.

So a lot of people do the only thing that makes sense:

They stay put.

That is the strange reality of this housing market.

The same high rates keeping buyers out are also keeping sellers trapped inside.

A buyer looks at the monthly payment and says, “No thanks.”

A homeowner looks at his old mortgage rate and says, “I can’t give this up.”

So, the market freezes. Sales volume collapses.

But prices do not necessarily decline the way people expect.

That is the critical difference between today and 2008.

The last crash had forced sellers.

This market has locked-in owners – and a ton of people sitting on the sidelines.

Both sides are waiting for rates to fall.

But when that happens…

Housing Prices Could Actually Start Climbing Instead

A lot of people assume lower rates will finally make housing cheaper.

No doubt that will be true in some markets.

But as a whole, I believe it will likely result in the opposite.

Because lower rates will also unlock demand.

As I said, there is a massive group of people who want to buy but cannot make the numbers work right now.

There are also homeowners who would like to move but cannot justify giving up their old mortgage rate.

If rates fall far enough, some of those owners will finally list their homes.

But many of them will also become buyers.

They are not selling because they want out of housing forever.

They are selling because they want to move, upgrade, downsize, relocate, or buy something that fits their life better.

So lower rates may not create the wave of cheap homes the crash crowd is hoping for.

They may thaw the market.

And when a frozen market thaws, demand can return very quickly.

This is especially important because the underlying housing supply picture is still very tight…

Which you can see from this chart showing the number of housing units divided by the number of adults in the U.S.

This is the part people waiting for a crash don’t want to hear.

Because it means today may be closer to “as affordable as it gets” than many buyers want to believe.

This also means that many people may find themselves permanently priced out of housing.

It’s not a happy reality…

And it’s certainly not one I’m cheering on.

But that’s just what the data is telling me right now.

Which brings me to the bigger lesson…