Not a Crash: How Today’s Inventory Differs from 2008

Even if you didn’t own a home during the 2008 housing crisis, you probably remember its impact. Many worry that it could happen again, but today’s market is 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.”

Experts are confident because the market isn’t oversupplied with houses like it was in 2008. Here’s a breakdown of the three main sources of housing supply:

1. Homeowners Deciding to Sell Their Houses
2. New Home Construction
3. Distressed Properties (Foreclosures or Short Sales)

Let’s examine each source to see why today’s inventory isn’t like 2008.

Homeowners Deciding to Sell Their Houses

While the supply of existing homes is up from last year, it’s still low overall. Nationally, the current months’ supply of homes is well below what it was during the crash. The 1999-2023 average inventory was 5.3 months, while in 2008, it peaked at 10.4 months. Currently, it stands at about 3.7 months.

This means there aren’t enough homes available to cause prices to drop significantly. For a repeat of 2008, we’d need a lot more sellers and very few buyers, which isn’t the case now.

New Home Construction

People are concerned about new home construction, wondering if builders are overdoing it. While new homes make up a larger percentage of the total inventory, there’s no need to worry. Builders are catching up from years of underbuilding, not overbuilding. During the lead-up to the 2008 crash, builders set records for four consecutive years. Since then, they have been much more cautious, resulting in a steady increase to meet demand but not surpass it.

According to Bankrate:

“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)

During the housing crisis, there was a flood of foreclosures due to lax lending standards. Today, lending standards are much tighter, resulting in fewer foreclosures. The number of foreclosures peaked in 2009 but has steadily decreased since. During the pandemic, foreclosure moratoriums and forbearance programs helped keep the numbers low, and although there has been a slight uptick, it's still below typical levels.

As lending standards improved, the number of foreclosures decreased. Although foreclosure volumes are ticking up, it’s only compared to recent years with very few foreclosures. We’re still below normal levels.

What This Means for You

Inventory levels aren’t high enough for prices to drop significantly or for the 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 out:

“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, and experts agree that’s unlikely to change soon. That’s why housing experts and inventory data tell us there isn’t a crash on the horizon.