Are We in a Housing Bubble?

As the pandemic shifts housing priorities and costs continue to soar, experts assess the potential for a crash similar to 2008's Great Recession.

2 minute read

June 16, 2021, 9:00 AM PDT

By Diana Ionescu @aworkoffiction


House

divanov / Shutterstock

With home prices and rents rising across the country, Jerusalem Demsas, writing for Vox, attempts to answer the question, "are we in a housing bubble?"

"[T]here’s no agreed-upon economic definition for an asset bubble," writes Demsas. "And in everyday conversation, it appears to mean 'prices have gone up a lot and I think they’re going to come crashing down again.'" Regardless of the label, Demsas argues that home prices depend "on public policy choices that are in our control."

According to research by Harvard economist Robin Greenwood and his fellow researchers, "just because prices rise really fast doesn’t mean it’s a bubble in danger of popping. The definition needs to be narrower than that." A "frenzied ethos" is also a key component. "In general, what people are looking for to determine if there might be a bubble in housing is that the fast price appreciation is detached in at least some ways from the fundamental reasons why prices increase or decrease normally (like supply or demand)." 

Regardless of the bubble status of today's housing market, homeowners and buyers, overall, face less risk than before the 2008 crash. "This isn’t a situation where a ton of people have mortgages that they won’t be able to pay off — the marginal homebuyer is wealthier and more secure than in the lead-up to the Great Recession." But "[p]rices are rising, homeownership is increasingly out of the reach of many Americans, and the alternative (renting) is also increasingly expensive, especially in the most job-rich parts of the country. This is an unhealthy, unstable, and unacceptable state of affairs." Demsas blames restrictive zoning laws for "turning an asset that could be widely available into a scarce one" and suggests that local governments should encourage increased density and more housing production to help supply meet rising demand.

Monday, June 7, 2021 in Vox

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Get top-rated, practical training

Wastewater pouring out from a pipe.

Alabama: Trump Terminates Settlements for Black Communities Harmed By Raw Sewage

Trump deemed the landmark civil rights agreement “illegal DEI and environmental justice policy.”

April 13, 2025 - Inside Climate News

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

April 23, 2025 - Diana Ionescu

Black and white photos of camp made up of small 'earthquake shacks' in Dolores Park in 1906 after the San Francisco earthquake.

The 120 Year Old Tiny Home Villages That Sheltered San Francisco’s Earthquake Refugees

More than a century ago, San Francisco mobilized to house thousands of residents displaced by the 1906 earthquake. Could their strategy offer a model for the present?

April 15, 2025 - Charles F. Bloszies

Looking out at trees on 4th Street in downtown Los Angeles, California.

LA’s Tree Emergency Goes Beyond Vandalism

After a vandal destroyed dozens of downtown LA trees, Mayor Karen Bass vowed to replace them. Days later, she slashed the city’s tree budget.

5 hours ago - Torched

White and blue Sacramento regional transit bus with one bike on front bike rack.

Sacramento Leads Nation With Bus-Mounted Bike Lane Enforcement Cameras

The city is the first to use its bus-mounted traffic enforcement system to cite drivers who park or drive in bike lanes.

6 hours ago - Streetsblog California

View of downtown Seattle with Space Needle and mountains in background

Seattle Voters Approve Social Housing Referendum

Voters approved a corporate tax to fund the city’s housing authority despite an opposition campaign funded by Amazon and Microsoft.

April 23 - Next City