Do you remember that housing crash way back in 2008? Even if you didn't own a home at the time, it was pretty hard to miss. Well, if you're concerned that history might repeat itself, I've got some good news for you - the housing market today is not like it was in 2008.

Well, the thing is, there just aren't enough homes up for sale right now. The supply is actually falling short, unlike before when there were way too many houses on the market. If we were to see a crash, we'd need to see an excess of available homes, but the data doesn't indicate that's happening at all.

When it comes to where all those houses come from, there are three main sources:

• Homeowners like you are considering putting their beloved homes on the market.

• Newly built homes.

• Distressed properties (foreclosures or short sales)

Let's dive into today's housing inventory to see why it's different from what we experienced in 2008.

Homeowners Deciding To Sell Their Houses

Housing supply has increased compared to last year, but it's still pretty low. Right now, the number of available homes for sale is below what's considered normal. You can see this more clearly in the graph below. If you check out the latest data in green and compare it to 2008's data in red, you'll notice that we only have about a third of the inventory available today compared to back then.

So, here's the deal: the current situation is that there simply aren't enough homes on the market for home values to go down. To see a repeat of what happened in 2008, there would have to be a ton of people selling their houses but not enough buyers, and that's just not the case at the moment.

Newly Built Homes

Have you heard all the buzz about what's happening with newly built houses lately? It's got people wondering if homebuilders are taking it too far. Take a look at the graph below. It gives you a clear picture of the number of new houses built in the past 52 years.

You know what's interesting? It turns out that builders haven't been building enough homes for like, 14 whole years! Can you believe that? And guess what? That's why we're facing such a low inventory situation today. It's like they've created this major deficit in supply because they just haven't been building enough homes. Crazy, right?

So, basically, the last blue bar on the graph is showing that things are picking up and heading towards the long-term average. But don't worry, it's not going to lead to an oversupply of homes all of a sudden. There's still a big gap to fill before we reach that point. And to be honest, builders are being smarter this time around and not going crazy with building too many homes like they did during the housing bubble.

Distressed Properties (Foreclosures and Short Sales)

When we talk about where we can find inventory, one option is distressed properties. These include short sales and foreclosures. Remember back in the day when we had the housing crisis? Yeah, that was a mess. There were so many foreclosures because lending standards were pretty loose. Lots of people were getting home loans that they really couldn't afford. It was a tough time for the housing market, but it did create a source of inventory.

Let's talk about how lending standards have changed over the years. Nowadays, these standards are much stricter, which is actually a good thing. It means that we have more qualified buyers in the market and way fewer foreclosures. To give you a visual, take a look at the graph below. It's based on data from the Federal Reserve and shows how things have shifted since the housing crash. Pretty interesting, isn't it?

Check out this graph. It basically shows that when banks started being stricter with their lending standards and buyers became more qualified, the number of foreclosures began to decrease. Now, when we look at 2020 and 2021, something interesting happened. First, there was a moratorium on foreclosures, which means they were temporarily put on hold. On top of that, there was this thing called a forbearance program, which helped homeowners delay or reduce mortgage payments. Both of these measures worked together to prevent a repeat of the huge wave of foreclosures we saw back in 2008. Pretty neat, huh?

The forbearance program was a total game changer, you know? Homeowners got all these new options—they could defer their loans or make modifications. It's crazy! And you know what? The data backs it up. About 80% of homeowners who came out of forbearance either paid off their loans completely or figured out a repayment plan to avoid foreclosure. So, you can rest easy knowing that there won't be a flood of foreclosures hitting the market. Pretty reassuring, right?

What This Means for You

The amount of houses available for sale right now is not even close to what it would take for prices to go down big time and for the housing market to completely crash. Bankrate says that this situation isn't going to change any time soon, especially because there are still a lot of people who want to buy houses.

““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.””

— Bankrate

Bottom Line

You know, it's pretty clear that we won't be seeing a housing crisis like we did back in 2008. The thing is, there just aren't enough homes on the market right now, and it doesn't look like that's gonna change anytime soon. So when we look at the housing inventory, it's telling us that there's absolutely no crash coming our way.