How Does the Current Market Compare to the Housing Bubble?


This year has been a year of relative uncertainty for what lies ahead – with COVID-19 we’re in an unprecedented time.

In conversations with people, we’re finding that many consumers are drawing comparisons to 2005, but industry professionals aren’t. They’re two completely different animals. Here’s why.

We’re at opposite ends of supply and demand.

In 2006 we had excess supply. We had far more homes for sale than buyers to buy them. We currently have a historic shortage of supply – just not enough homes for the people who want to buy them.

There’s a few factors at play. First, we had a shortage of inventory before COVID-19, and that has continued to grow. In addition, Millennials who wanted to rent are now anxious to begin building wealth through homeownership. Investors took a break when Covid hit but are now jumping back in.

In 2004, investors were a large part of the buying market. Now, they are a small part of the demand. Most homebuyers today are buying a primary residence – the home they’ll live in. In fact, in Maricopa and Pinal counties, owner-occupied primary residence buyers make up 77.3% of the market, with investors at 12.2% and Owner-occupied secondary homes at 8.6%. iBuyers buying to resell the homes only make up 1.6%.

People have more equity, which means fewer foreclosures.

Unlike the mid 2000s, most distressed homes will be unlikely to become foreclosures. Fifteen years ago, many homeowners didn’t have equity due to a variety of reasons including a prevalence of cash-out refis, but today, almost all homes have substantial owner equity and will be able to be sold normally, with very few needing to be sold as a “short sale.” Owners facing difficulties have more options today, and should connect with the Klaus Team to discover solutions to help them – in some cases even staying in their current homes.

Impending foreclosures won’t hurt the market in 2021.

In 2004, mortgage delinquency rates were high, and currently we’re seeing a similar rise in forbearance and mortgage delinquency. One key difference, however, is that there was already a huge supply of homes for sale in 2004, and 2 years later in 2006 we saw excess supply beyond that from foreclosures. When bank-owned homes hit the market in 2006, the market was already over-supplied, so we saw price drops.

Today, we have a shortage of inventory. If we saw a new wave of distressed homes, it would actually HELP the market. New inventory would be snatched up quickly and prices would continue to rise. More inventory, even bank-owned, would bring the market into a more normal balance and bring price increases down to a healthy, moderate pace.

Lending is much more solid today.

Fifteen years ago, lending didn’t have the restraints it does today. There were many fraudulent loan applications, with many homeowners never even making the first loan payment. Loan fraud was rampant. There were also issues behind the scenes with wall street firms resorting to abnormal practices and sub-prime loans.

Lending guidelines now are more streamlined with increased documentation requirements and oversight. It’s a night and day difference from 2005 and 2006.


The market is quite a bit different from fifteen years ago. Today, with historically low inventory, it’s a great time to buy. There are more solutions than ever before for home sellers and for home buyers. For homeowners in forbearance or behind in your mortgage, call us today to discuss your options.

For those who have a home to sell in order to buy, we have even more solutions, including the Klaus Team Buy then Sell program! For those who have been renting, there are some great solutions for first-time buyers and additional opportunities for those who choose to lease to own.