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Economist Peter Schiff made a name for himself by predicting the housing crisis of 2008. Now he’s sounding the alarm about another potential crisis in the U.S. housing market, one that could lead to a wave of homeowners returning their keys by mail.
“Why are housing prices so high? Because for a long time, the Federal Reserve kept interest rates at zero, so a lot of people were able to get really low mortgages, 3% mortgages, 4% mortgages,” Schiff explained in a YouTube video from 2025 (1).
“And since houses are bought not based on what they cost, but based on the monthly payment, the lower the monthly payment, the more someone could pay for a house. Now we have the problem of home prices going up a lot, but then mortgage rates went up a lot and home prices never came back down to levels consistent with more expensive mortgages.”
In fact, mortgage rates have skyrocketed. The average rate on a 30-year fixed mortgage has gone from less than 3% just a few years ago to more than 6.1% today (2). Typically, higher borrowing costs can cool the market, but prices remain stubbornly high: the S&P Cotality Case-Shiller Home Price Index, which tracks the price of single-family homes in the United States, has risen more than 43% over the past five years (3).
Schiff believes prices will “eventually” fall to match today’s higher rates, a painful adjustment that he warns could trigger “a housing emergency.”
“It’s going to create a lot of defaults and a lot of people will walk away and mail their keys in because they can’t sell their houses for more than they owe,” he said.
The scenario sounds familiar. During the 2008 crisis, many underwater homeowners (those who owed more than their homes were worth) simply mailed their keys to the lender and walked away.
Today’s market is different. Lending standards are stricter than during the subprime mortgage era, making widespread negative equity less common. Supply constraints are also a factor: Zillow estimates that the United States is short about 4.7 million homes, a gap that has helped keep prices high (4).
Schiff argues that many homeowners are staying put only because they set ultra-low mortgage rates, which are now limiting the number of homes for sale.
“But at some point, there are people who have to sell their homes for whatever reason and if they have to reduce prices to do so, they may not have enough money to pay the mortgages. And this could have a cascading effect,” he warned.
According to December 2025 sales data from the National Association of Realtors (NAR), pending home sales fell 3% from a year ago and had plunged 9.3% since November (6). While seasonality could be a factor here, the NAR suggests that the decline in pending home sales could be the result of consumers facing a lack of inventory and feeling like they don’t have many good options on the table.
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While Schiff is wary of the American homeownership market, he recognizes a persistent trend: “Rents are going up every year,” he noted on his show.
America’s housing affordability crisis is, in part, a reflection of broader pressures on the cost of living, and underscores how real estate can serve as a hedge. As inflation raises the cost of materials, labor, and land, home values tend to increase as well. Rental income often follows suit, giving owners cash flow that adjusts with inflation.
In fact, investing legend Warren Buffett has often pointed to real estate as an excellent example of a productive, income-generating asset. In 2022, Buffett commented that if he was offered “1% of all the apartment buildings in the country” for $25 billion, “I would write you a check (8).”
Of course, you don’t need billions of dollars (or even buying a house outright) to benefit from real estate investing. Crowdfunding platforms like Arrive They offer an easier way to gain exposure to this income-generating asset class.
Backed by world-class investors like Jeff Bezos, Arrived allows you Invest in rental house stocks with just $100all without the hassle of mowing the lawn, fixing leaky faucets, or dealing with difficult tenants.
The process is simple: browse a select selection of homes that have been vetted for their appreciation and income potential. Once you find a property you like, select the number of shares you want to purchase and then sit back while start receiving positive rental income distributions of your investment.
In a recent JP Morgan report, Al Brooks, vice president of Commercial Banking at JP Morgan, said, “I think multifamily is absolutely where you want to be as an investor.” He added: “The multifamily rental market may still feel the impact of a recession, but to a lesser extent than other asset classes (9).
If diversification into multifamily rentals appeals to you, you might consider investing with Lightstone DIRECT, a new investment platform from Lightstone Group, one of the nation’s largest private real estate companies with more than 25,000 multifamily units in its portfolio.
By eliminating the middleman (brokers and crowdfunding intermediaries), accredited investors with a minimum investment of $100,000 can gain direct access to institutional-quality multifamily opportunities. This simplified model can help reduce fees while improving transparency and control.
And with Lightstone DIRECT, you invest in single-asset multifamily deals alongside Lightstone, a true partner, as Lightstone invests at least 20% of its own capital in each offering. All Lightstone investment opportunities undergo a rigorous multi-stage review before being approved by Lightstone directors, including founder David Lichtenstein.
How it works is simple: simply sign up with your email and you can schedule a call with a capital formation expert to evaluate your investment opportunities. From here, all you have to do is verify your details to start investing.
Founded in 1986, Lightstone has a proven track record of delivering strong risk-adjusted returns throughout market cycles with a historical net IRR of 27.6% and a historical net equity multiple of 2.54 times on investments made since 2004. In total, Lightstone has $12 billion in assets under management, including industrial and commercial real estate.
As such, even if multifamily rentals don’t appeal to you, Lightstone could still serve as an investment vehicle for other real estate verticals.
Get started with Lightstone DIRECT today and invest alongside seasoned professionals with experience in the game.
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Peter Schiff (1, 7); Federal Reserve Bank of St. Louis (2); S&P Global (3); Zillow (4); Gold price (5); National Association of Realtors (6); JP Morgan (7, 9); CNBC (8)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
