Even
if you didn't own a home at the time, you probably remember the housing
crisis in 2008. That crash impacted the lives of countless people, and
many now live with the worry that something like that could happen
again. But rest easy, because things are different than they were back
then. As Business Insider says:
“Though many Americans believe the housing market is at risk of crashing, the economists who study housing market conditions overwhelmingly do not expect a crash in 2024 or beyond.”
Here’s why experts are so confident. For the market (and home prices)
to crash, there would have to be too many houses for sale, but the data
doesn't show that’s happening. Right now, there’s an undersupply, not
an oversupply like the last time – and that’s true even with the inventory growth we’ve seen this year. You see, the housing supply comes from three main sources:
- Homeowners deciding to sell their houses (existing homes)
- New home construction (newly built homes)
- Distressed properties (foreclosures or short sales)
And if we look at those three main sources of inventory, you’ll see it’s clear this isn’t like 2008.
Homeowners Deciding To Sell Their Houses
Although
the supply of existing (previously owned) homes is up compared to this
time last year, it’s still low overall. And while this varies by local
market, nationally, the current months’ supply is well below the norm,
and even further below what we saw during the crash. The graph below
shows this more clearly.
If you look at the latest data (shown in green), compared to 2008 (shown in red), we only have about a third of that available inventory today. 
So,
what does this mean? There just aren't enough homes available to make
values drop. To have a repeat of 2008, there’d need to be a lot more
people selling their houses with very few buyers, and that's not the
case right now.
New Home Construction
People
are also talking a lot about what's going on with newly built houses
these days, and that might make you wonder if homebuilders are overdoing it. Even though new homes make up a larger percentage of the total inventory than the norm, there’s no need for alarm. Here’s why.
The graph below uses data from the Census to show
the number of new houses built over the last 52 years. The orange on
the graph shows the overbuilding that happened in the lead-up to the
crash. And, if you look at the red in the graph, you’ll see that
builders have been underbuilding pretty consistently since then: 
There’s just too much of a gap to make up. Builders aren’t overbuilding today, they’re catching up. A recent article from Bankrate says:
“What’s more, builders remember the Great Recession all too well, and they’ve been cautious about their pace of construction. The result is an ongoing shortage of homes for sale.”
Distressed Properties (Foreclosures and Short Sales)
The last place inventory can come from is distressed properties, including short sales and foreclosures.
During the housing crisis, there was a flood of foreclosures due to
lending standards that allowed many people to get a home loan they
couldn’t truly afford.
Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from ATTOM to show how things have changed since the housing crash: 
This
graph makes it clear that as lending standards got tighter and buyers
became more qualified, the number of foreclosures started to go down.
And in 2020 and 2021, the combination of a moratorium on foreclosures (shown in black) and the forbearance program helped prevent a repeat of the wave of foreclosures we saw when the market crashed.
While
you may see headlines that foreclosure volume is ticking up – remember,
that’s only compared to recent years when very few foreclosures
happened. We’re still below the normal level we’d see in a typical year.
What This Means for You
Inventory
levels aren’t anywhere near where they’d need to be for prices to drop
significantly and the housing market to crash. As Forbes explains:
“As already-high home prices continue trending upward, you may be concerned that we’re in a bubble ready to pop. However, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.”
Mark Fleming, Chief Economist at First American, points to the laws of supply and demand as a reason why we aren't headed for a crash:
“There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101.”
And Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“We will not have a repeat of the 2008–2012 housing market crash. There are no risky subprime mortgages that could implode, nor the combination of a massive oversupply and overproduction of homes.”
Bottom Line
The market doesn’t have enough available homes for a repeat of the 2008 housing crisis – and there’s nothing that suggests that will change anytime soon. That’s why housing experts and inventory data tell us there isn’t a crash on the horizon.
Sally Heldman
Broker Owner
Metro Brokers / Heldman Real Estate
303.475.4508 CELL
sally@sallyheldman.com