Even if you didn’t own a home during the 2008 housing crisis, you likely remember its impact. Many people still worry about a repeat, but today’s market is fundamentally different. According to Business Insider:
“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.”
Why Experts Are Confident
For a market crash like 2008 to happen, there would need to be an oversupply of homes, but that’s not what we’re seeing today. Instead, there’s an undersupply, even with the inventory growth this year. Let’s break down the sources of housing supply:
Homeowners Deciding to Sell:
The supply of existing homes is up compared to last year but remains low overall. Nationally, the current months’ supply is well below the norm and significantly lower than during the 2008 crash.
We only have about a third of the available inventory compared to 2008, meaning there aren’t enough homes on the market to drive values down drastically.
New Home Construction:
Concerns about overbuilding are unfounded. While new homes make up a larger percentage of the total inventory than usual, builders are catching up from years of underbuilding, not overbuilding.
Builders remember the Great Recession and have been cautious, resulting in an ongoing shortage of homes for sale.
Distressed Properties:
The flood of foreclosures during the housing crisis was due to loose lending standards. Today, lending standards are much tighter, leading to more qualified buyers and fewer foreclosures.
Even with recent increases, foreclosure levels remain below what’s typical for a normal year.
What This Means for You
The current inventory levels aren’t sufficient for a significant price drop or market crash. 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, attributes this to supply and demand principles:
“There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101.”
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), adds:
“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. Current data and expert opinions indicate that a crash isn’t on the horizon. Rest easy, knowing that today’s housing market is built on a much more solid foundation.
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