New York CNN Business — Mortgage rates are soaring. And for many prospective home buyers, especially first-time purchasers, the combination of rising home loan costs and still sky-high real estate prices make the idea of purchasing a home prohibitively expensive…if not impossible.

But don’t tell that to the CEO of real estate developer Howard Hughes Corp. In an interview with CNN Business, David O’Reilly said that he’s not too worried about another housing market crash and explains why.

“We probably are technically in a housing recession,” he said, referring to a term used to describe a decline in home sales for at least six months. “We are clearly in a downturn, but this is much different.”

O’Reilly said that in the years leading up to the 2008 collapses of Bear Stearns, Lehman Brothers, Washington Mutual and others, there was a glut of new homes that had been built.

“We had a massive oversupply when Lehman hit the wall,” he said. “But housing starts now have significantly trailed formations.”

That means that the number of Americans that could buy a home (formations) exceeds the number of new homes (starts) coming to market. So demand outstrips supply, and that makes prices unlikely to fall off a cliff like they did in 2008.

“There was a housing shortage of around 5 million homes before the onset of the pandemic. That shortage is not going away soon,” said Lawrence Yun, chief economist with the National Association of Realtors trade group, in a report last month.

Pockets of strength in the Southwest

O’Reilly noted that in the markets where Howard Hughes has a big presence, such as Phoenix, Las Vegas and Houston, he expects a so-called soft landing for the housing.

Why? Demand for homes in those cities remains strong, particularly for retired Americans living on the East or West Coast looking to retire.

“We’re seeing a migration out of big cities on the coasts and into the Southwest,” he said. “There is continued buying from older adults that can get twice the house with much lower taxes.”

O’Reilly said the fact that mortgage rates have now spiked to 7% is not that much of a deterrent for older buyers who are selling their existing homes for huge premiums. Many of them are able to sell houses in New York or California at a profit and can use the cash to buy new homes with either no mortgage or a very small loan.

Howard Hughes also has a presence in commercial real estate…and that is a more challenging market in light of the changing nature of how many Americans, particularly those with white collar jobs, work.

“Clearly, people are not going to use office space the way they did before the pandemic,” O’Reilly said.

O’Reilly noted that there’s another challenge for commercial developers. Banks have far tighter lending standards in the wake of the Great Recession, in large part due to new federal laws put into place that were designed to make sure financial firms don’t get into trouble with bad loans like they did in 2008.

“It’s now almost impossible to get a loan or refinancing of an office building, even with strong fundamentals,” he said, adding that banks are still willing to approve loans for multifamily housing (i.e. apartment buildings) but that they are “running away from retail, offices and hotels.”

Weakness in commercial real estate is probably one of the main reasons why Howard Hughes (HHC), like the stocks of other real estate companies, has plunged this year. Shares are down more than 40%.

O’Reilly conceded that the biggest problem for real estate companies and other financial firms is that nobody really has much of a clue just how much more aggressive the Fed is going to be in order to get inflation under control.

“Banks are uncertain about where rates are going. I think we all are,” he said

*Story originally appeared on