Not a Crash: 3 Graphs That Show How Todays Inventory Differs from 2008

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.

Heres 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 thats happening. Right now, theres an undersupply, not an oversupply like the last time and thats true even with the inventory growth weve 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, youll see its clear this isnt like 2008.

Homeowners Deciding To Sell Their Houses

Although the supply of existing (previously owned) homes is up compared to this time last year, its 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, thered 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, theres no need for alarm. Heres 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, youll see that builders have been underbuilding pretty consistently since then:

Theres just too much of a gap to make up. Builders arent overbuilding today, theyre catching up. A recent article from Bankrate says:

Whats more, builders remember the Great Recession all too well, and theyve 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 couldnt 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, thats only compared to recent years when very few foreclosures happened. Were still below the normal level wed see in a typical year.

What This Means for You

Inventory levels arent anywhere near where theyd 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 were in a bubble ready to pop. However, the likelihood of a housing market crasha rapid drop in unsustainably high home prices due to waning demandremains low for 2024.

Mark Fleming, Chief Economist at First Americn, points to the laws of supply and demand as a reason why we aren't headed for a crash:

Theres just generally not enough supply. There are more people than housing inventory. Its Econ 101.

And Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

We will not have a repeat of the 20082012 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 doesnt have enough available homes for a repeat of the 2008 housing crisis and theres nothing that suggests that will change anytime soon. Thats why housing experts and inventory data tell us there isnt a crash on the horizon.