Obsession with the 2007 housing bubble

“It’s going to be 2007 all over again in the housing market.” That’s been the message now for five years. Today, I want to compare 2007 and 2025 for the sake of talking about the market. Scroll by topic or digest slowly. Where do you think we are on this continuum right now?

UPCOMING SPEAKING GIGS:

6/5/25 Auburn Marketing Meeting PCAR
6/12/25 Realtist of Sacramento
6/26/25 Comps & Adjustments (3 hours)
7/22/25 Investor Event (TBA)
9/10/25 Windermere Sacramento
9/16/25 Culbertson & Gray (private)
9/24/25 Keller Williams Roseville
9/26/25 PCAR
9/30/25 Elk Grove Regional MLS Meeting
10/15/25 EDH Coldwell Banker (private)
10/21/25 Orangevale MLS Meeting
11/4/25 SAR Main Meeting

By the way, did anyone else wear Obsession? This was my scent thirty years ago. A broker friend tells me this is what the clubs smelled like in the ’90s. Haha.

NOTHING WRONG WITH PRICES GOING DOWN

First off, there is nothing wrong with prices going down. I’m not writing to sugarcoat the market or say current affordability levels are healthy. This is about thoughtful analysis and maybe a good reminder to be careful about 2007 obsession.

2007 BUBBLE OBSESSION

The housing narrative online often compares today with 2007, and many people are expecting to see 2007 all over again because of that. I get it. But let’s back up and recognize 2007 wasn’t the only correction we’ve ever seen, which means it’s not the new template for every future correction either. Know what I’m saying? And yes, I made a Mean Girls meme, which is either a new career high or low. You decide.

Okay, let’s dig into 2007 and 2025. I’m unpacking the Sacramento market, but many areas show this same trend.

SUPPLY HASN’T BUILT LIKE IT DID IN 2007

We’re seeing much more housing supply lately, but it’s still nothing like 2007. Sometimes when I say this, people get bent out of shape thinking I’m sugarcoating, but we literally had five times more monthly supply back then. If anything, it seems like a comparison to 2007 is flippant rather than statistically similar.

There is no mistaking supply has risen though, and it’s been at about two months lately. On one hand, this is a historically normal number, but it’s been enough to flatten the trend and even get us some year-over-year negative price readings from indexes like Zillow and Homes.com. So, I wouldn’t say things like, “Supply is normal, so prices can’t go down.” That’s not real.

PRICES WERE ABLE TO EASILY CRASH IN 2007

Supply rose very quickly back then, which set the stage for rapid price change eventually. Monthly inventory began building in the summer of 2005, and over the course of one year, it literally tripled. The median price didn’t dip that much yet, but after a second year of huge supply gains through the summer of 2007, we saw a massive price crash. Granted, there were other things happening in the market at the time with fraud, adjustable-rate mortgages, and a deep recession brewing, but there is no mistaking there was a massive difference in supply back then that allowed for prices to crash.

Can you see why prices haven’t crashed today? We just haven’t had a huge spike in supply. Of course, we don’t need exact 2007 dynamics to see prices change, but a collapse hasn’t happened because the market has been way too tight.

If you predict something long enough, maybe you’ll be right eventually. Just don’t expect me to think you’re a certified prophet. I get bored when people try to suck me in to be afraid. That doesn’t do it for me. Here’s the kicker. What would happen if prices went down dramatically? Doomers would then start the fear cycle all over again to promote the next bubble. Yawn. On a serious note though, if you are perpetually afraid, that’s not a good outlook for life. Take better care of yourself.

DON’T EXPECT A 2007 EVENT WITHOUT 2007 VIBES

Look, prices can go down today even though we don’t have ten months of housing supply, but it’s hard to get a 2007-type crash with 2007 supply vibes. For instance, in the region we had about 10,000 more active listings back then compared to today’s levels. Could you imagine what that would do to prices today if we injected ten thousand extra listings?

2025 IS SIMILAR TO 2007 WITH A VOLUME CRASH

The number of sales fell off a cliff for 2.3 years between 2005 and 2007, and volume sharply returned afterward since prices went down so fast. Well, volume today has been subdued for three years now with only slight growth so far. Basically, we’ve had a prolonged 2007 volume crash over the past few years, but it hasn’t come with a price crash. I hear many people saying things like, “volume change precedes price change,” and I get that. But we have to concede that prices today have remained higher to date because we’ve had tens of thousands of sellers not list their homes. Thankfully, sellers are thawing out more lately, and that’s changing the trend, but it’s been quite a long volume drought. Unfortunately, we can expect for volume to continue be lower until there is a sharper change with affordability.

IT USED TO TAKE 90 DAYS TO SELL

It’s taking almost a month to get into contract today, which seems like forever compared to a few years ago, but it was taking three times longer to sell in 2007 and 2008. Look, we are no longer in a quick-moving juiced pandemic market, but days on market as a stat isn’t sensational today either.

And some more stats. What I like about this visual is it shows what’s happening with actives and pendings – not just sales.

COMPETITION IS SOFTER, BUT NOT 2007 SOFT

It’s no longer 2021 in the stats, but it’s also nowhere close to 2007 either. All we hear about today is about price reductions and properties selling below the original price, but how does this market line up with others? The truth is competition levels are actually pretty normal. However, if the market does continue to soften, I expect to see these numbers change and go above the pre-2020 norm. One thing to keep in mind is these stats only represent closed sales, and the trend is softer in the properties that aren’t selling.

NOT ALL CORRECTIONS ARE THE SAME

One of the big things to recognize today is not every recession or housing market correction will automatically be the same as the last one. Many people today are so fixated on what happened last time in 2007, but let’s back up and concede that 2007 isn’t the new template for every future market.

THE MARKET HASN’T LIKED UNCERTAINTY THESE PAST 2 MONTHS

Uncertainty has been on steroids over the past couple of months in light of tariffs and perceived worry about the future economy, and the housing market hasn’t liked it. Since early April in Sacramento, we’ve seen the number of weekly pending contracts dip below 2024 and 2023 levels. This is something to keep watching, and it’s important to remember that uncertainty can increase or fade. In other words, uncertainty ebbs and flows, and it doesn’t last forever. For instance, the blue line showed a slight uptick over the past week of data, and that’s positive for housing demand. By the way, this is not a partisan statement. It’s so hard to talk about anything relating to politics today, but let’s be open to discussion and give the White House praise or critique – whichever it deserves. And let’s keep watching what happens with tariffs, inflation, consumer confidence, the economy, and whether the Fed is going to cut rates or not. Last year we had a more vibrant second half of the year, and I’m eager to see if we have a similar pattern IF we actually get lower rates.

CLOSING ADVICE

Be a student of the housing market, keep changing your narrative as the stats change, be careful about conflating 2025 with 2007 when the stats aren’t the same, choose wisely who you listen to about today’s market, and cultivate objectivity to keep yourself from being swept away in sensationalism. One more thing. Here’s a great conversation about humility and predictions with Barry Ritholtz and Paul Krguman (thanks for the link Joe).

Thanks for being here.

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Questions: What stands out to you most above? How is the market similar and different to 2007? I’d love to hear your take on things.

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