The U.S. housing market is experiencing one of the most rapid and dramatic shifts in its history.

The reason is pretty simple: Spiked mortgage rates are sidelining buyers across the country.

And it’s far from over. Last week, Fed Chair Jerome Powell even went as far as to call it a “difficult correction.”

While the speed and breadth of the slowdown have some Americans worried about a repeat of the 2008 housing bust and subsequent global financial crisis, others aren’t as concerned. John Paulson, the hedge funder who famously pocketed $4 billion betting against the U.S. housing market in 2008, is among those who believe history isn’t repeating itself.

“We’re not at risk of a collapse today in the financial system like we were before,” Paulson told Bloomberg on September 25. “Yeah, it’s true, housing may be a little frothy. So housing prices may come down or they may plateau, but not to the extent it happened [in 2008].”

A tale of two Wall Street oracles

Paulson, who started his hedge fund (which has since been converted to a family office), Paulson & Co., in 1994 and boasts a net worth of $3 billion, believes that the housing market is on stronger footing than it was at the start of the Great Financial Crisis.

“The underlying quality of the mortgages today is far superior. You don’t even have any subprime mortgages in the market,” he said. “In that period [2008], there was no down payments, no credit checks, very high leverage. And it’s just the opposite of what’s happening today. So you don’t have the degree of poor credit quality in mortgages that you did at that time.”

After the blow-up of the 2008 housing bubble and subsequent global financial crisis, senators passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in order to ensure the stability of the U.S. financial system and improve the quality of U.S. mortgages.

The act created the Consumer Financial Protection Bureau (CFPB), which is tasked with preventing predatory mortgage lending. In the years since the CFPB’s creation, the average credit rating of homebuyers has improved dramatically. Leading up to the 2008 housing bust, U.S. homebuyers’ average credit rating was 707. In the first quarter of this year, it was 776, according to data from Bankrate.

Bank of America Research analysts led by Thomas Thornton also found that the portion of buyers with so-called “superprime” FICO scores of 720 or above hit 75% this summer. During the years preceding the 2008 housing bust, just 25% of buyers boasted similarly strong credit.

The Dodd-Frank Act also established the Financial Stability Oversight Council which monitors the health of major U.S. financial firms and sets reserve requirements for banks, and the Securities and Exchange Commission (SEC) Office of Credit Ratings which verifies the credit ratings of major firms after critics argued private agencies gave misleading ratings during the financial crisis. Both of these regulatory bodies have helped to improve the resiliency of the U.S. financial system and banks during times of economic stress.

Paulson noted on September 25 that banks were highly leveraged during the financial crisis and took risks that would be seen as unacceptable in today’s markets after the Dodd-Frank act established the Volcker Rule, which prevents banks from making some specific types of risky investments.

“The problem, in that period of time, was the banks were very speculative about what they were investing in. They had a lot of risky subprime, high-yield, levered loans. And when the market started to fall, the equity quickly came under pressure,” he said, noting that the average bank now has three to four times as much equity as they did during the Great Financial Crisis of 2008, which makes them less susceptible to default.

While Paulson isn’t worried about a repeat of 2008, hedge funder Michael Burry, who also rose to fame predicting and profiting from the Great Financial Crisis, as depicted in the book and movie “The Big Short,” has warned for years that he believes the global economy is in the “greatest speculative bubble of all time in all things.”

Burry argues that central banks created a bubble in everything from stocks to real estate with loose monetary policies after the Great Financial Crisis, and pandemic-era spending meant to boost the economy only made things worse.

Now, as central bank officials around the world shift stances to fight inflation and continue raising interest rates in unison, the hedge fund chief argues asset prices will fall dramatically.

“There is risk growing in many sectors. The unfettered narrative feeding itself until the absurdity explodes, revealing the folly to all and easily starting a revolution,” Burry said in a cryptic, since-deleted Sept. 21 tweet.