The wounds from the Great Recession of the mid-2000s are still healing, especially when it comes to housing. An estimated 10 million people lost their homes to foreclosure from 2006 to 2014, following a period of frenzied and speculative homebuying fueled by easy credit. The housing market is yet again on a tear with home prices up nearly 19% nationally compared with last year, and that has people rightfully worried that another housing bubble is brewing.

Unlike the last housing boom, one could argue that home price growth since the start of the pandemic was justifiable. The demographics of the U.S. were already supporting housing growth and the desire to own only increased as people saved more and spent more time at home. The lifestyle change brought on by the pandemic caused many Americans to reassess their living arrangements, including some renters that turned into house hunters and some existing homeowners that sold to move into a larger home.

The jump in homebuying demand hit right as existing housing supply declined rapidly for a variety of reasons, including fear of COVID-19. Homebuilders, most of whom became more prudent following the last cycle, were cautious with how many homes they were bringing to the market, resulting in equally tight new home inventory.

The supply and demand mismatch pushed prices upward, but that was just the tip of the iceberg for rising home values. Some Americans became much wealthier over the past year following a 31% run-up in the S&P 500 and a nearly 20% jump in home equity. Others became wealthier on a relative basis as remote work led to increased migration, often from higher cost areas to lower cost ones.

Further, safety measures have been put in place since the Great Recession to help prevent a similar housing collapse. Mortgage credit availability is starkly tighter than in the mid-2000s and the often more risky adjustable rate mortgages represent less than 5% of total purchase and refinanced loans compared with over 35% at the peak of the last cycle.