Hans Struzyna

Hi, we’re Hans and Kristin Struzyna, a powerhouse husband and wife team, offering a real estate experience with your success as the core driver of everything we do. We believe in building authentic relationships, exceptional advice, effective communication, and constantly striving to be the best so we can deliver the best. 

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2021 Market Crash? Why we ARE NOT in a housing bubble.

Is the bay area housing bubble going to pop soon? My prediction? No. Because we’re actually not in a bubble.

Before you make a judgment on this video because it’s a real estate agent talking about how we’re not in a bubble, just give me a chance first to tell you what I’m seeing. I did a bunch of research this week on this exact topic because I was going to make a video about how the market is a bit over inflated and we’re probably going to crash because that’s what everyone else is doing on YouTube.

However, I found some interesting data that makes me think a little differently. Maybe it’s not necessarily a bubble. Maybe the market will correct it but it’s just not going to be the same as last time. 

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Definition of a Housing Bubble

First and foremost, we need to define what a bubble actually is. According to Investopedia (link), a housing or real estate bubble is a run-up in housing prices fueled by demand, speculation, and exuberant spending to the point of collapse. A housing bubble usually starts with an increase in demand, in the face of limited supply. So that’s exactly where we are and have been for a long time here in California, and the Bay Area specifically.

Additionally, speculators pour money into the market, further driving demand. And at some point, demand decreases or stagnates and prices drop. That’s when the bubble pops.

Housing bubbles are always temporary, but can last for years. They are usually started and driven by unusual behavior in the market place like what I just described. Like the excess demand, limited supply, speculation, high investment, high liquidity, that sort of thing.

These really inflate the prices artificially. Then eventually, that demand stagnates and it crashes, hence, popping.

So a lot of people would suggest that because of coronavirus and all this economic uncertainty that we’re facing– especially with the election, taxes, and Covid related news — that it was hard to say what direction we’re going in. Most feel that its just a matter of time before we turned into another 2008 crash.

Admittedly, I was feeling the same way and did a bunch of research about this to see what I could learn.  Through the California Association of Realtors and other sources, I came up with some really interesting historical housing data. For this video, I pulled some interesting slides which show data which are leading me to believe that we’re not in a bubble right now. Today, I’m going to share those slides with you.

Job losses concentrated in lower-wage industries

Supply and demand is at the core of any real estate market in any bubble. We have definitely seen a disproportionate amount of demand relative to supply in the Bay Area– that’s why prices have gone up. Since a lot of jobs were lost since the coronavirus pandemic broke out, most people would think if this is sort of artificial. However when you look at the distribution of who lost their jobs here in the state of California, it’s primarily people from the lower-wage industries as shown in the figure below.

Housing Bubble - Job Loss

These are usually people who are paid on an hourly basis and who are on the lower income side of the equation. While that is absolutely terrible and something that needs to be addressed, these people usually belong to the renting population more often than to the home-owning population, because of how expensive the single family homes are right now, in general.

That being said, the white collared professionals like the office workers, tech workers, and all other professionals who have higher paying jobs did relatively okay even with the pandemic. In fact, in some cases, their income even increased since the pandemic broke out. By and large, they are also the usual groups who are transacting in real estate and with the increase in demand, the housing prices have of course been pushed up.

Prices of Units Have Trended Upwards

Interestingly, the number of units in the state of California that transact every year has been very steady over the last several decades. However, the prices of those very same units have since gone up. Today, the median price for a home in California is $706,000. Shocking, right?

CA Median Price

I know it’s crazy and also why it’s the topic of so many videos. It’s also the reason why everyone thinks we’re in a bubble. Because the prices are so high. But let’s break this down in a couple of different ways first.

A $706,000 median price means that your 20% down payment would be around $141,200. Admittedly, that’s quite a lot of money to save up especially because the cost of living here in the Bay Area is very high. However, assuming that you could save up for it, it will mean that you’ll have a $564,800 mortgage. At 3.25%, that puts you in a payment and interest of $2,458 a month. (Disclaimer: I’m not a lender and I can’t quote so make sure you talk to somebody before you go use this rate to go shopping for a home.)

The reason I brought up $2,400 a month for a home is because it’s not particularly outrageous, depending on where you are. As an example, it’s actually a little less than what I’m paying for my current place and I know for a fact that my 2 bedroom/1 bathroom house here in Alameda is absolutely not at market rate. This only shows that a lot of people here in the Bay Area are able to make that payment. Therefore, assuming you can get to that 20% down payment, it means that the median price isn’t actually that unachievable, which brings me to my next point. 

Prices are not as Inflated as They Were in 2005-2007

Investopedia defines affordability index as a measure of an average person’s ability to purchase a particular item, such as a house, in a particular region. 

Housing Bubble - Price Inflation

From this graph, you can see that the housing payment versus the monthly income is still much lower than it was in 2005 to 2007. This means that even though the median price has gone up, when it comes to the monthly payments, people are still not really stretching themselves from an affordability standpoint.

International buyers down sharply

When we’re talking about speculation a handful of years ago, everyone was really concerned about all cash foreign investment driving up the prices. Back then, Chinese, Australian, and Russian buyers were coming in and plunking down all cash without ever moving in. For many, it was just a place to put money.

However, if you’ll look at the graph below, you’ll see that the number of international buyers are down substantially. In fact, as prices have gone up here locally, that number has also decreased steadily as a trend.

International Buyers

More of everything except permits and new construction

The population has definitely increased over the last several decades and we’re almost 40 million residents in California. Looking at this graph however, you’ll see that permits have dropped, statewide. This indicates that new construction is a lot lower than it used to be. Additionally, it will be interesting to see if there’s an impact on that relative to the Biden tax plan and affordable housing and all that stuff, which I will talk about in another video.

California Permits

It will also be really fascinating to watch this trend because new construction just hasn’t been a thing here locally. Even though there’s a surge in demand, there has also not yet been an increase in supply to actually meet it, despite the increase in number of people leaving the state and selling their homes as shown in the next table.

More Sellers Continue to Move out of California

More sellers move out of California

The number of people moving out of California to another state has been at its highest since 2005. However, overall, the population has still grown. So basically, there’s still a lot of people coming in from other states to fill that gap of the 30% of people who sold their homes and left the state.

Mortgage Forbearance

Mortgage forbearance is another big concern because people think that if a lot of properties again get foreclosed on, it’s going to be a total madhouse. There’s going to be a surge of inventory that comes in of all these REO’s and bank-owned properties and that is going to lead us to another move towards the bubble bursting because those banks generally sell at a discount.

Well according to what we estimate here in California, at least, of the estimated 600,000 foreclosures to occur nationwide, we’re only going to get about 60,000 of them. When you disperse that across all the metro areas, it’s not really a huge impact.

Housing Bubble - Foreclosures

Additionally, when you look at the predictions of how much or how little versus market value you’re going to see you if the REO’s took 30% market share and sold for a 40% discount, that wouldn’t necessarily drive the whole thing down in a huge flaming ball of fire. There’s also probably a middle ground here as well. That’s not to say it won’t necessarily take prices down but it’s not going to totally tank them as far as I can tell, as of today.

People are keeping their equity in their homes

The other really interesting thing that’s really important to know relative to foreclosures is that people are keeping their equity in their homes.


When compared to 2007 we’re around 1/3 the amount of equity people are cashing out. And if you’ve tried to buy a house or refinance anytime in the last six months, you know that there is a huge run on refinancing because rates are so low. The appraisers are also all backed up but even with all that refinancing, cashing out, HELOCs, we’re still not seeing people take equity out of their properties at the same rate as before. So because there’s that equity cushion sitting in the property, the likelihood of the default happening at the same rate is low.

Additionally, people are also probably not going to walk away from a huge equity position in a property if they get into trouble. They’ll just sell it on the open market.

There is a speculation component

I want to circle back on the speculation component for a moment. We know foriegn investment is down but there is another part of this. In 2008, people were assuming housing prices were going to continue to go up, and rates were going to go down, and people could sell for more in a few years or refinance in that amount of time, they made reckless buying and financing decision. 

We simply aren’t seeing that behavior right now. The use of adjustable rate mortgages is as low as it’s ever been. Therefore, we can assume that the buyer pool is being less speculative.  People are not behaving that way as they once were so that speculation component plus the foreign investment being down is not here in the same way.

In summary…

So here’s the deal. I don’t see a bubble here locally. Nationally, possibly but locally? No. Demand is really high and it has been for a really long time. Separately, speculation activity has gone down because the use of adjustable rate mortgages and foreign investment are way way down. Not to mention that a lot of the foreclosures that we’re seeing are going to have some kind of repayment program or some long term option for people kind of get back on their feet. That’s just going to be part of the deal this time. And it’ll be really interesting to see what happens, but ultimately the market feel much sounder than in the lead up to 2008. That being said, people thought that last time too.

 I think what is really truly happening is people are valuing home differently right now. People are seeing a yard, a work from home space, and a place to have their kids be safe and learn from, and all of those kind of factors as worth much more than they used to be. I think that that has taken on more value than it used to. And I think that is partially why you’re seeing the values increase. Not to mention the fact that the people who are actually able to save up that substantial $150K or more down payment and afford the monthly payments are the ones who are doing well economically, right now. And of course, those are the people who are driving the single family home market here locally. 

I hope my video about the 2021 real estate market crash and why we are NOT in a housing bubble has helped you.

If you agree with me, or disagree with me, or if I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!


Hans Struzyna,

The market has shifted and you need to be aware of where we are going. I have created a free resource packed with all the information I tell all my clients when they start shopping.

Download my COVID Era Buyers Guide:

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3 thoughts on “2021 Market Crash? Why we ARE NOT in a housing bubble.”

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