You might remember the housing crash in 2008, even if you didn't own a home at the time. If you’re worried there’s going to be a repeat of what happened back then, there's good news – the housing market now is different from 2008.
One important reason is there aren't enough homes for sale. That means there’s an undersupply, not an oversupply like the last time. For the market to crash, there would have to be too many houses for sale, but the data doesn't show that happening.
Housing supply comes from three main sources:
- Homeowners deciding to sell their houses
- Newly built homes
- Distressed properties (foreclosures or short sales)
Here’s a closer look at today's housing inventory to understand why this isn’t like 2008.
Homeowners Deciding To Sell Their Houses
Although housing supply did grow compared to last year, it’s still low. The current months’ supply is below the norm. The graph below shows this more clearly. If you look at the latest data (shown in green), compared to 2008 (shown in red), there’s only about a third of that available inventory today.
So, what does this mean? There just aren't enough homes available to make home 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 happening right now.
Newly Built Homes
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. The graph below shows the number of new houses built over the last 52 years:
This graph illustrates, as lending standards got tighter and buyers were more qualified, the number of foreclosures started to go down. And in 2020 and 2021, the combination of a moratorium on foreclosures and the forbearance program helped prevent a repeat of the wave of foreclosures we saw back around 2008.
The forbearance program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.
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. According to Bankrate, that isn’t going to change anytime soon, especially considering buyer demand is still strong:
“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”
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 inventory tells us there’s no crash on the horizon.
