A Thomas Sowell-Style Reality Check on Today’s Market
By Lane Stone, Sackin-Stone Team
In 2008, economist Thomas Sowell published The Housing Boom and Bust, an intelligent and insightful look at how poor policy decisions, risky lending, and limited housing supply helped fuel one of the biggest real estate crashes in U.S. history. It was also a required read for my Chapman University Real Estate Development course!
Nevertheless, fast forward to 2025, and a lot of buyers and sellers in Orange County are wondering the same thing: Are we setting ourselves up for a repeat?
Let’s take a look at today’s market through Sowell’s philosophy and see how Orange County stacks up.
Inventory: We Still Don’t Have Enough Homes
Orange County is pretty much built out. There isn’t much land left, and strict zoning laws make it hard to add new housing. That limited supply continues to drive up prices.
Right now, we’re sitting at 3.3 months of housing inventory, which is up 32% from last year and the highest we’ve seen in the last 5 years. But that’s still well below what experts consider a balanced market (typically 5 to 6 months).
Some cities are approving new developments… like converting offices into residential or building on former golf courses (goodbye to Irvine’s Oak Creek Golf Club)… but it’s not happening fast enough to meet demand.
Bottom line: Supply is still tight, and that’s keeping prices up.
Lending: Much Safer Than Before
One of the biggest problems in 2008 was risky lending. Lenders were handing out loans with little documentation, low credit scores, and tiny down payments.
That’s not what we’re seeing today.
The average credit score for new mortgage borrowers is 758. Most buyers are getting traditional loans, and even though FHA and VA loans are becoming more common again, they still go through a rigorous approval process.
While there are a few exceptions such as certain investor loans, most buyers today are well-qualified.
Bottom line: Lending is much stricter than it was before the crash. Lending is much stricter than it was before the crash.
Interest Rates: Higher, but More Realistic
Sowell blamed some of the 2000s housing bubble on the Federal Reserve keeping interest rates too low for too long. That encouraged people to borrow more than they should.
Now we got a sense of this post-Covid… we call those the unicorn years. We saw 20%+ in home appreciation in one year during this period. However, in 2025, we’re not seeing the same thing. Mortgage rates are around 6.625%, which feels high compared to the last decade, but they’re actually close to the long-term average.
Inflation is cooling, and while the President wants rates to come down, the Fed is playing it safe for now. Most people expect some rate cuts over the next year, especially if a new Fed Chair is appointed in 2026.
Bottom line: Rates are higher, but not artificially low. They reflect the market.
Government Programs: Less Involvement, Less Risk
Back in 2008, government policies pushed lenders to loosen standards and offer risky loans. That added fuel to the fire.
Today, we’re not seeing the same level of involvement. Lending rules are still tight, and while there are a few down payment assistance programs out there, they haven’t made a big impact on the Orange County market, or they weren’t enough. The CA Dream for All program for example dried up within days.
Bottom line: The government isn’t pushing risky lending like it did before. The government isn’t pushing risky lending like it did before.
How OC Compares to Other Markets
In The Housing Boom and Bust, Sowell compared places like California where it’s hard to build (and still is) with states like Texas or Florida, where there’s more land and fewer restrictions.
That gap still exists. Orange County’s median home price (including attached homes) recently hit $820,000, just shy of the all-time high. Even with slower sales, prices remain strong.
Meanwhile, other states offer more affordable homes and lower barriers to entry. OC wages haven’t kept up with rising home prices, which is making it harder for first-time buyers to get in.
Bottom line: OC is still expensive, and affordability is getting worse—not better.
So… Are We in a Bubble?
Not exactly. When you look at what caused the last crash: risky loans, too much government intervention, artificially low rates… we’re in a very different place now.
But that doesn’t mean everything is smooth sailing. The real challenge today is affordability. Prices are high, inventory is tight, and many families feel priced out of the market.
This isn’t a repeat of 2008. It’s something new: a stable market that’s under pressure. And if we don’t start building smarter, faster, and more affordably, that pressure could surface and cause some real issues.
If you’re trying to figure out whether to buy, sell, or wait, it’s more important than ever to work with a team that understands both the history and the current reality.
Want to talk about your options in today’s market? Reach out anytime! We’re here to help you make smart moves, not emotional ones.
