When it comes to housing, far too many people jump to immediate conclusions without considering all the facts, which is how myths are created.

 

MYTH—Housing is flooded with homes on the market. Across the U.S., the active inventory grew to 1.45 million homes in April, 21% higher than in the same month last year and 39% higher than two years ago. Yes, there are more homes on the market in almost every city and neighborhood; yet, the inventory is rising from record-low levels. It is all about perspective. In April 2019, there were 1.83 million homes, 26% higher than today. In 2016, it was at 2.12 million homes, 46% higher. Yet, those data points were during the housing market’s expansion years from 2012 through 2019. In April 2006, before the Great Recession, there were 3.42 million homes, nearly 2 million more homes on the market. Inventory levels reached 3.81 million in 2008, a substantial 162% higher than today. While demand levels are considerably muted due to the higher mortgage rate environment, they are matched against a limited supply compared to the significantly higher levels of the Great Recession. This fact is one of the main reasons housing prices have been so resilient.

 

MYTH—The drop in home values during the second half of the year will lead to plunging prices. The pressure on home values to fall is building as the inventory has grown extensively, even though demand has remained relatively unchanged. In Orange County, there are 4,595 homes on the market, 75% higher than last year’s 2,620 homes, and more than double May 2023’s 2,190 homes. Today’s demand (a snapshot of the number of new pending sales over the prior month) is at 1,621 pending sales, 2% less than last year’s 1,650 reading, or 3% less than two years ago’s 1,665 pending sales. In examining supply and demand, the supply is increasing, while demand has remained relatively unchanged. This increases the pricing pressure. According to the Freddie Mac House Price Index, the Los Angeles-Orange County metro area experienced a 9% year-over-year gain in March 2024. It dropped to an annual increase of 3% in March 2025. As the inventory continues to grow and demand remains at similar muted annual levels, home values could start to fall slightly. Yet, far too many people get ahead of themselves and expect any drop in home values to be the beginning of a significant downturn that will develop into rapidly falling home prices. The inventory is returning to pre-pandemic levels, which are still significantly lower than those of the Great Recession and previous decades. Today’s United States housing stock is the strongest ever. Ever since the Great Recession, buyers have been purchasing homes with strict qualifications, strong credit, great jobs, and low fixed payments. There is a record amount of tappable equity (the amount of equity a homeowner can use for a loan while still retaining at least 20% equity), a record number of equity-rich properties (those with 50% or more equity), and a record number of homeowners who own their homes free and clear. There will be no housing crash because of the strength of the homeowner and the limited supply, even if the supply returns to pre-pandemic levels.

 

MYTH—Homeowners are not moving because they are “locked into” low mortgage rates. In California, 80% of all mortgages have an interest rate of 5% or lower. 64% have a rate at or below 4%, and 29% have a rate at or below 3%. With mortgage rates bumping around 7% for the past few years, the argument has been that the “mortgage lock-in effect” has prevented homeowners from placing their homes on the market. While very few homeowners put their homes on the market in 2023, the first full year of the higher mortgage rate environment following a rise from 3.25% to 7.37% in 2022, more homeowners are participating in the housing market. In the first quarter of 2022, 89% of all homeowners with a mortgage had a rate at or below 5%. It dropped to 80% at the end of 2024, meaning many homeowners gave up their low fixed rate, placed a "For Sale" sign in their yard, and moved. In Orange County through April, there were 19% more "For Sale" signs than in the same period last year, and 39% more than in 2023, representing an additional 3,056 signs.

 

MYTH—Timing the market is the best strategy in purchasing a home. Many people believe that if they wait a little longer, home prices will magically drop to a point where they’ll snag a “deal of a lifetime.” This myth is perpetuated by news and social media headlines that continuously call for a housing correction or slowdown. The burn of the Great Recession is still fresh in people’s minds, so they feel a crash is coming. Yet, since World War 2, home values have only dropped considerably during the 1990s Savings and Loan crisis (isolated to Southern California and the Bay Area), and the Great Recession. Major turns in housing values do not occur after a specific number of years. There was a 17-year gap between the turn in housing values from 1990 to 2007. Timing the market is nearly impossible. Nobody knows when the perfect “dip” will happen. Prices could plateau instead of dropping, and they might not come down much at all. Interest rates could change, too. Even a small dip in mortgage rates to 6% has resulted in a considerable jump in demand, with improved affordability. If the economy downshifts further and the job market deteriorates, rates will drop as the Federal Reserve steps in and lowers the Federal Funds Rate. Instantly, there will be a significant increase in demand, especially for entry-level homes. Housing will quickly change from sellers competing with each other to buyers competing with multiple bids for a property. Ultimately, buyers should take advantage of motivated sellers today. If someone is ready to buy with good credit, a stable income, and manageable debt, that’s more important than waiting for the “perfect” time to purchase. 

 

The bottom line: ignore social media’s megaphone of negative housing narratives and turn to facts and data. The data does not lie.