By Guest commentary Sunday, June 1st, 2025

By John Grace

We all know no one can predict the future. If we could, we’d all be sipping piña coladas in our beachside mansions bought with Bitcoin in 2012. Instead, we’re squinting at the horizon like financially anxious meerkats, trying to guess how the economic wind is blowing. 

It’s a lot like driving while staring into the rearview mirror — you might survive the straight road, but heaven help you when you hit a curve.

Warren Buffett once said, “Predicting rain doesn’t count, building the ark does.” I don’t know about you, but when the Oracle of Omaha starts talking biblical, we check the lifeboats, grab a hammer, and some plywood. And maybe a floatie, just in case.

Today’s investors, unfortunately, are a bit too busy counting the shingles on the housing market’s roof to notice the storm clouds gathering. Everyone’s hyper-focused on home shortages and not on the giant whoopee cushion this housing bubble has become. 

Spoiler: it’s losing air, and fast.

Let’s hop in our economic Tesla and quickly detour to 2006. Picture this: A lovely, intelligent married couple with three beautiful children — she’s a realtor, he’s a mortgage broker — living the Southern California dream with three gleaming homes in Pasadena. 

When we politely suggested selling one of their properties (because, you know, our research team was screaming about an imminent 40% housing decline), they told us not to worry. They had stellar rental income from a dentist and a doctor. Real estate, they said, was rock solid.

Fast-forward to 2008. It turns out even doctors get hit with recession toothaches. 

The rentals went empty. Property values crashed, and both were lost. As the stock market plummeted 57%, according to the Federal Reserve History archive, home prices took a nosedive, too, over 30% on average by 2011.

Now, in 2025, we’re not saying déjà vu, but… okay, we’re saying déjà vu. 

American households owe a collective $18 trillion, and 70% of that is mortgage debt. Credit card delinquencies are rising like sourdough during lockdown, and auto loans have reached $1.655 trillion. 

The average car loan clocks in at $24,326, and the number of 30-day delinquencies rose to 3.52%, double the rate from the pandemic low in 2021, according to the Motley Fool.

Meanwhile, the luxury home market is giving us major ghosting vibes. The Wall Street Journal reports wealthy buyers are backing out of home purchases faster than you can say “adjustable-rate mortgage.”

It seems even the rich are starting to hear the hiss of deflating housing hopes.

Harry Dent and I are baffled by the number of economists sipping the optimism Kool-Aid like a limited-edition Starbucks drink. 

Dent, never one to sugarcoat, warned again on May 1, “Home equity is what’s lost, and it’s leveraged heavily by mortgages. That’s why a 50% housing crash is much worse than an 89% stock crash like 1929–32.”

Let that sink in: a 50% drop in your home’s value doesn’t just sting — it chainsaws your net worth. 

The last housing bubble saw home equity fall from $14 trillion to $8 trillion, hovering above where it all began in 2000. If this bubble bursts, we might not just lose our equity — we could lose our shirts and financial floaties, too.

So let’s take a cue from Buffett and start hammering our arks. This isn’t about fear — it’s about foresight. 

When your economic dashboard lights up with “Police Activity Ahead,” maybe it’s time to slow down and reconsider the route. The NAR (National Association of Realtors) economists and talking heads might say, on TV, real estate always comes back. 

How much time do you have? With U.S. life expectancy at 57 in the 1920s, after the 70% loss in NYC home prices thanks to the Great Depression, it took NYC real estate 4 decades to recover, that’s right 40 years. 

It wasn’t until 1960 that housing prices recovered, per the New Republic. Life expectancy was 57, according to the U.S. Census Bureau. Regret is that gift that keeps on giving.

While no one can predict rain, the equity we love counting as cash is no different from the chips in Vegas; both are worthless until we cash out. Meanwhile, we can pack an umbrella.

• John Grace is a financial planner and president of Investor’s Advantage in Thousand Oaks.