How the Real Estate Market Has Changed Over the Last 20 Years

Craig Nassi
May 13 · 3 min read

The U.S real estate market underwent one of its most tumultuous periods ever a decade ago, ushering in many of the biggest changes that have swept the housing market during the last 20 years and which continue to affect it to this day.

Craig Nassi, the Founder and CEO of BCN Development, which was founded in 1994, says the market was just beginning to take off 20 years ago after nearly a decade of struggles coming out of the 1990 recession. It was also the start of the greatest boom/bust/boom cycle in the U.S housing market’s history.

Between 2000 and 2006, the Case–Shiller Home Price index soared by 80%, hitting an inflation-adjusted record high. Housing starts, which had bottomed out in the early 1990s, began trending higher over the following 15 years, picking up steam as the housing bubble grew and eventually topping 2 million annually just before the crash. Home ownership rates also peaked around that time, topping 69%.

Financial Crisis Devastates the Housing Market

The 2008 financial crisis, which resulted from unscrupulous lending and risk-taking on the mortgage market, decimated the housing market. Some cities have yet to recover from the collapse in housing prices, with cities in New Mexico, Wisconsin, and Minnesota being among the hardest hit.

After the financial crisis, home ownership cratered to less than 63% by 2015, while the number of renters jumped by over 25%, the result of many former homeowners defaulting on their mortgages and having to turn to rentals.

Those trends have only just started to reverse slightly in the past couple of years, though a shortage of entry-level homes is making it difficult for new buyers to enter the market. That in turn has led to entry-level houses outpacing luxury houses in terms of value growth over the past five years, gaining 8.5% during that time compared to just 3.6% for luxury homes according to Zillow.

Craig Nassi — Record Low Inventory Should Boost Housing Market for Several Years

Housing starts completely collapsed after the 2008 meltdown, sliding to less than 600K annually between 2008 and 2012. They have since risen above 1 million, though that figure is still well below historical norms.

A decade of record low housing starts has created the greatest inventory shortage in history, with just 17 homes for sale per 1,000 U.S households. Homeowners with cushy interest rates coming out of the collapse have been loath to sell even as home prices have rebounded across much of the U.S, preferring to rent out their properties instead, which has contributed to the shortfall.

Given the strength of the U.S economy, the record low housing inventory, and how affordable mortgages are, Craig Nassi does not see the housing market slowing down any time soon, particularly on the low-end of the market.

Not everyone agrees with him, as some are predicting that home prices are due for a correction given their surge coming out of the financial crisis’ bottom. The various data points can certainly be interpreted in multiple ways.

Whatever the case may be, one can only hope the future state of the housing market is not nearly as crazy as it has been over the past two wild decades.

Craig Nassi

Written by

Founder and CEO at BCN Development — New York, NY.