Is the Housing Market Going to Crash? Ivy Zelman

Key Takeaways

The "chronic housing shortage" is largely a myth. Zelman argues the market is roughly in balance nationally, running near 1.4 million starts, rather than being chronically undersupplied the way the popular narrative suggests.

It is a tale of two geographies. Overbuilt COVID boom markets across the Sun Belt (Florida, Texas, Arizona, Nevada) have seen prices fall off peak, some by as much as 20%, while supply starved Midwest and coastal markets keep rising.

Affordability is the real crisis, and the worst since the early 1980s. By Zelman's math, a median priced home can require close to 60% of a typical buyer's income once taxes and insurance are included, putting ownership out of reach for many.

This is not a 2008 style setup. Post crisis lending rules keep the conventional mortgage market sound, in her view; the pockets of rising delinquency sit in FHA loans, a slice she puts at under 15% of the market.

It is clearly a better time to rent than buy. Zelman estimates the monthly gap between renting and owning is roughly $800 to $900, close to record levels.

Key Moments

00:00 - The housing market is not in shortage Zelman's headline claim: the market is closer to balance than the rhetoric suggests.

00:21 - Why home prices are splitting across America The tale of two geographies, from the overbuilt Sun Belt to the starved Midwest and coasts.

03:13 - The entry level affordability crisis Why the squeeze falls hardest on first time buyers.

07:45 - What mortgage rate would fix housing? Why rate buydowns alone are not enough to qualify buyers.

10:44 - Why Ivy Zelman says there's no housing shortage The outdated 1.5 million starts assumption and why she thinks it is wrong.

13:48 - The biggest housing market myth investors believe Where the shortage story holds (workforce housing) and where it does not.

16:47 - Is it better to rent or buy right now? The record wide gap between a monthly rent and a monthly mortgage.

18:37 - Builders, lumber costs, and what's next for home prices Cost cutting, oil surcharges, and the constraint on affordable construction.

Is the Housing Market Going to Crash? Why Ivy Zelman Says the Shortage Is a Myth

A housing crash is a broad, sustained drop in home prices, the kind of event that defined 2008. As of mid 2026 that is not what housing analyst Ivy Zelman of Zelman & Associates sees coming. Speaking with Wealthion, Zelman argued that the market is closer to balance than the "chronic shortage" narrative admits, that prices are splitting sharply by region and by price point, and that the real problem is not supply at all but affordability, now the worst it has been since the early 1980s.

Is the housing market going to crash?

Not in the 2008 sense, on Zelman's read. She describes a market that is broadly in balance rather than on the edge of collapse: "the market overall is in balance as opposed to the rhetoric that you hear." That said, balance nationally hides real pain in specific places. Overbuilt markets are already seeing meaningful price declines, and the affordability crunch has frozen many would be buyers out entirely. So the story is less a crash than a stall, with sharp regional exceptions.

Is there really a housing shortage?

Zelman's most contrarian claim is that the shortage is largely a myth. She argues the market is running near 1.4 million starts, which she considers balance, and that the long standing rule of thumb of needing 1.5 million starts is outdated because household growth is decelerating: "that number is the wrong number." The one place the shortage story genuinely holds, she says, is workforce housing, which is hard to develop and remains tight, while multifamily is actually oversupplied. She is confident enough in her firm's analysis to invite the challenge directly: "I feel like it's bulletproof. So, bring it on."

Why are home prices splitting across the country?

Because supply, not demand, is driving the divergence. Zelman describes a tale of two geographies. COVID boom Sun Belt markets (Florida, Texas, Arizona, Nevada) drew heavy inbound migration, builders overbuilt on the assumption it would last, and prices there have fallen off peak, in some cases by as much as 20%, with inventories up 20% to 40% versus 2019. By contrast, the Midwest and coastal markets saw almost no development and remain starved for supply, so prices there are still rising at mid single digit rates. She points to Hartford, Connecticut, where inventory is down roughly 80% from 2019, and her own Cleveland, as classic sellers' markets.

Why is housing affordability so bad?

Because the cost of ownership has outrun incomes to a degree not seen in four decades. Including property taxes and insurance, Zelman says a median priced home can consume close to 60% of a typical buyer's gross income, a level of strain that "hasn't been this stretched since the early 80s," when mortgage rates were in the high teens. Three variables drive affordability: home prices, mortgage rates, and income. With incomes now rising faster than prices, she expects slow improvement rather than relief. The squeeze is also a K shaped one: entry level buyers are largely priced out, while move up and luxury buyers, buoyed by record stock and crypto gains, keep transacting.

Would lower mortgage rates fix it?

Only partly, because rate is not the main blocker. Zelman estimates mortgage rates would need to fall to roughly 4.5% to restore trend affordability, holding incomes and prices constant. Yet large builders already offer rate buydowns as low as 4.5%, 4.99%, and even 3.99%, and still struggle to qualify buyers: "it's not just about rate." The real obstacles, she says, are down payments and debt, with many applicants carrying back end debt to income ratios above 50% when underwriters want them in the high 40s. Each 25 basis point move in rates changes a monthly payment by roughly 3%, so higher rates simply eliminate more marginal buyers.

Are we headed for another 2008 style crisis?

No, in Zelman's view, because the lending system is built differently now. She credits the qualified mortgage rules that came out of Dodd Frank in 2014 with putting real guardrails around conventional lending, which she does not see as a source of risk. Where she does see stress is FHA, where delinquencies are rising, though she notes that segment is under 15% of the market, and even VA borrowers, despite 100% loan to value, are paying on time. In short, the fragility of the subprime era is not present in the core of today's market.

Is it better to rent or buy right now?

Clearly rent, by Zelman's math. She puts the gap between a typical monthly rent and a comparable monthly mortgage at roughly $800 to $900, a spread she says is close to record levels. Rent trends themselves vary by region: Sun Belt new lease rent growth is still slightly negative but improving from steeper declines, while supply constrained coastal markets such as San Francisco are up low double digits. Looking out, she expects households to grow faster in multifamily than in for sale housing because of the affordability gap, with better rent growth resuming around 2027.

What does this mean for housing investors and builders?

For investors, Zelman sees multifamily transaction activity still depressed but improving, and institutional build to rent capital picking back up after a legislative scare that threatened to restrict it. For builders, the picture is tighter. They cut costs impressively over the past year and a half, pushing back on supplier price increases thanks to the scale of the public builders, but 2026 brings oil linked surcharges and lumber back at its highest level in over a year, both of which pressure margins and the economics of affordable construction. Underlying all of it is demographics: births have fallen below replacement, Zelman expects deaths to exceed births by 2030, and she argues immigration is the only lever that can meaningfully lift population growth, one she does not expect either party to pull. As always on Wealthion, these are one analyst's attributed views, not recommendations.

What Investors Should Watch

• Regional divergence: whether overbuilt Sun Belt inventory keeps working toward a bottom while supply starved Midwest and coastal markets stay tight.
• Housing starts versus balance: Zelman's roughly 1.4 million line, above which she expects oversupply to build after 2030.
• Buyer balance sheets, not just rates: down payment gaps and back end debt to income ratios, which she calls the real affordability blockers.
• FHA delinquency trends: the segment where she sees credit risk building, in contrast to a sound conventional market.
• Lumber and oil linked input costs: the pressures on builder margins and on finished lot development.

FAQ

Is the housing market going to crash? Not in a 2008 sense, according to Ivy Zelman. She describes a market that is broadly in balance nationally, with real price declines concentrated in overbuilt Sun Belt markets rather than a systemic collapse.

Is there a housing shortage in the US? Zelman argues the shortage is largely a myth. She sees the market running near 1.4 million starts, which she considers balance, and says the widely used 1.5 million starts assumption is outdated because household growth is slowing. Workforce housing is the genuine exception that remains tight.

Why is housing so unaffordable right now? Because ownership costs have outrun incomes to the worst degree since the early 1980s. Zelman estimates a median priced home can take close to 60% of a typical buyer's income, and stresses that down payments and existing debt, not just mortgage rates, are keeping buyers out.

Would lower mortgage rates fix affordability? Only partly. Zelman says rates would need to fall to about 4.5% to restore trend affordability, but notes that builder buydowns as low as 3.99% still fail to qualify many buyers, because the binding constraints are down payments and debt to income ratios.

Is it better to rent or buy right now? Zelman says it is clearly a better time to rent. She estimates the monthly gap between renting and owning at roughly $800 to $900, close to record levels.

Which expert and interview does this article reference? This article draws on Wealthion's interview with Ivy Zelman, of Zelman & Associates: "Everything You Believe About the Housing Market Is Wrong."