As echoed by Business Insider, despite the lasting impact of the housing crisis in 2008, it's essential to recognize that the current real estate landscape has evolved significantly since then. Many individuals still carry the weight of those past events, fearful of a potential reoccurrence.

““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.”
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— Business Insider

Experts are confident because for the market and home prices to crash, there would need to be an excess of houses for sale. However, the data indicates there isn't an oversupply. Currently, there is actually an undersupply, unlike in the past. This remains true even with the increase in inventory this year. Housing supply primarily comes from three main sources.

• If homeowners are considering selling their existing houses.

• New home construction can also be referred to as newly built homes.

• Distressed properties, such as foreclosures or short sales.

If we examine those three primary inventory sources, it's evident that this situation differs significantly from 2008.

Homeowners Deciding To Sell Their Houses

Although there has been an increase in the supply of existing (previously owned) homes compared to this time last year, it remains relatively low. Despite variations in local markets, the current national months’ supply is significantly below the typical levels and even lower than what was observed during the housing market crash. The graph below provides a clearer visual representation of this situation.

In the most recent data (displayed in green), we currently only have around one-third of the available inventory compared to the numbers from 2008 (shown in red).

The current low inventory of homes means that there is not enough supply to cause property values to drop significantly. For a situation similar to the 2008 housing crisis to occur, there would need to be a substantial increase in the number of people selling their homes without enough buyers in the market. However, this scenario is not the case at present.

New Home Construction

It's common to hear discussions about the current state of newly constructed homes and whether homebuilders are going too far. Despite new homes making up a larger share of the total inventory than usual, there's no cause for concern. Here's why.

The graph here is based on Census data and displays the quantity of new houses constructed during the past 52 years. The orange section on the graph indicates excessive construction that took place before the economic crash. Additionally, the red portion of the graph highlights a decrease in house construction.

Builders are not overbuilding right now, they are simply trying to catch up. According to a recent article from Bankrate, there is a significant gap that needs to be addressed.

““What’s more, 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.”
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— Bankrate

Distressed Properties (Foreclosures and Short Sales)

Distressed properties, like short sales and foreclosures, are also a source of inventory. The housing crisis led to a surge in foreclosures as lending standards permitted individuals to secure home loans beyond their means.

In recent years, lending criteria have become stricter, leading to a higher number of well-qualified homebuyers and a significant reduction in foreclosed properties. The graph provided utilizes information sourced from ATTOM to illustrate the shifts that have occurred post the housing market crash.

So, here's the deal - when the rules for getting loans got stricter and buyers were better qualified, fewer homes were being foreclosed. Then, in 2020 and 2021, because there was a pause on foreclosures (you'll see that as the black line) and a program allowing delayed mortgage payments, things didn't spiral out of control like they did during the last market crash.

While there are reports indicating a slight increase in foreclosure volume, it's important to note that this uptick is only in comparison to the low foreclosure rates observed in recent years. Currently, we are still below the levels typically seen in a standard year.

What This Means for You

Inventory levels are currently not sufficient to trigger a significant drop in prices that could potentially lead to a crash in the housing market. This insight is highlighted by Forbes.

““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.”
”

— Forbes

Mark Fleming, Chief Economist at First American, highlights that the principles of supply and demand indicate that we are not on the verge of a market crash.

“Whatever it is, the way you tell your story online can make all the difference.”

— Mark Fleming, Chief Economist at First American

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

““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.”
”

— Lawrence Yun, Chief Economist at the National Association of Realtors (NAR)

Bottom Line

The real estate market doesn't currently have a sufficient number of homes available to see a repeat of the 2008 housing crisis. Based on information from housing experts and inventory data, there is no indication that this situation will shift in the near future, leading experts to believe that a market crash is not imminent.