Not a Crash: 3 Graphs That Show How Today’s Inventory Differs from 2008

<article class="post-1113807 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-1113807"><span class="entry-date">July 8, 2024</span><div class="entry-header center-block text-center"><h1 class="entry-title">Not a Crash: 3 Graphs That Show How Today’s Inventory Differs from 2008</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Not+a+Crash%3A+3+Graphs+That+Show+How+Today%E2%80%99s+Inventory+Differs+from+2008&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fnot-a-crash-3-graphs-that-show-how-todays-inventory-differs-from-2008%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="Not a Crash: 3 Graphs That Show How Today’s Inventory Differs from 2008 Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20240708-Blog-Header-Image-original.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width=""/>
<p>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 <em>Business Insider</em> says:</p>
<blockquote><p><em>“Though many Americans believe the housing market is at risk of crashing,</em><strong><em> the economists who study housing market conditions overwhelmingly do not expect a crash in 2024 or beyond</em></strong><em>.”</em></p></blockquote>
<p>Here’s why experts are so confident. For the <a href="https://www.simplifyingthemarket.com/2024/06/17/do-elections-impact-the-housing-market/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">market</a> (and <a href="https://www.simplifyingthemarket.com/2024/06/12/home-prices-arent-declining-but-headlines-might-make-you-think-they-are/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home prices</a>) to crash, there would have to be too many houses for sale, but the data doesn’t show that’s happening. Right now, there’s an undersupply, not an oversupply like the last time – and that’s true even with the <a href="https://www.simplifyingthemarket.com/2024/05/16/the-number-of-homes-for-sale-is-increasing/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">inventory growth</a> we’ve seen this year. You see, the housing supply comes from three main sources:</p>
<ul>
<li>Homeowners deciding to sell their houses (existing homes)</li>
<li>New home construction (newly built homes)</li>
<li>Distressed properties (foreclosures or short sales)</li>
</ul>
<p>And if we look at those three main sources of <a href="https://www.simplifyingthemarket.com/2024/06/05/the-sweet-spot-for-buying-luxury-homes/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">inventory</a>, you’ll see it’s clear this isn’t like 2008.</p>
<h4><strong>Homeowners Deciding To Sell Their Houses</strong></h4>
<p>Although the supply of existing (previously owned) homes is up compared to this time last year, it’s 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. </p>
<p>If you look at the latest <a href="https://www.nar.realtor/topics/existing-home-sales" rel="noopener noreferrer" target="_blank">data</a> (<em>shown in green</em>), compared to 2008 (<em>shown in red</em>), we only have about a third of that available inventory today. <a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240703/20240708-Average-Annual-Inventory-of-Homes-for-Sales-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240703/20240708-Average-Annual-Inventory-of-Homes-for-Sales-original.png"/></a></p>
<p></p>
<p>So, what does this mean? There just aren’t enough homes available to make values drop. To have a repeat of 2008, there’d need to be a lot more people selling their houses with very few buyers, and that’s not the case right now.</p>
<h4><strong>New Home Construction</strong></h4>
<p>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 <a href="https://www.simplifyingthemarket.com/2024/06/13/homebuilders-arent-overbuilding-theyre-catching-up/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">overdoing it</a>. Even though new homes make up a <a href="https://www.simplifyingthemarket.com/2024/05/09/the-top-2-reasons-to-consider-a-newly-built-home/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">larger percentage</a> of the total inventory than the norm, there’s no need for alarm. Here’s why. </p>
<p>The graph below uses data from the <em>Census </em>to <a href="http://www.census.gov/construction/nrc/xls/co_cust.xls" rel="noopener noreferrer" target="_blank">show</a> 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, you’ll see that builders have been underbuilding pretty consistently since then: <a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240703/20240708-Builders-Arent-Overbuilding-they-re-catching-up-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240703/20240708-Builders-Arent-Overbuilding-they-re-catching-up-original.png"/></a></p>
<p></p>
<p>There’s just too much of a gap to make up. Builders aren’t overbuilding today, they’re catching up. A recent article from <em>Bankrate</em> says:</p>
<blockquote><p><em>“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.”</em></p></blockquote>
<h4><strong>Distressed Properties (Foreclosures and Short Sales)</strong></h4>
<p>The last place inventory can come from is distressed properties, including short sales and <a href="https://www.simplifyingthemarket.com/2024/04/24/foreclosure-numbers-are-nothing-like-the-2008-crash/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">foreclosures</a>. During the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to get a home loan they couldn’t truly afford. </p>
<p>Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses <a href="https://www.attomdata.com/news/most-recent/u-s-foreclosure-activity-increases-quarterly-in-q1-2024/​" rel="noopener noreferrer" target="_blank">data</a> from <em>ATTOM </em>to show how things have changed since the housing crash: <a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240703/20240708-Foreclosure-Filings-Are-Very-Low-original.png" rel="noopener noreferrer" target="_blank"><img alt="No Caption Received" decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240703/20240708-Foreclosure-Filings-Are-Very-Low-original.png"/></a></p>
<p></p>
<p>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 (<em>shown in black</em>) and the forbearance program helped prevent a repeat of the wave of foreclosures we saw when the market crashed.</p>
<p>While you may see headlines that foreclosure volume is ticking up – remember, that’s only compared to recent years when very few foreclosures happened. We’re still below the normal level we’d see in a typical year. </p>
<h4><strong>What This Means for You</strong></h4>
<p>Inventory levels aren’t anywhere near where they’d need to be for prices to drop significantly and the housing market to crash. As <em>Forbes </em>explains:</p>
<blockquote><p><em>“As already-high home prices continue trending upward, you may be concerned that we’re in a bubble ready to pop. </em><strong><em>However, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024</em></strong><em>.”</em></p></blockquote>
<p>Mark Fleming, Chief Economist at <em>First American,</em> points to the laws of supply and demand as a reason why we aren’t headed for a crash:</p>
<blockquote><p><em>“There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101.”</em></p></blockquote>
<p>And Lawrence Yun, Chief Economist at the <em>National Association of Realtors</em> (NAR), says: </p>
<blockquote><p><em>“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.”</em></p></blockquote>
<h3>Bottom Line</h3>
<p>The market doesn’t have enough available homes for a repeat of the 2008 housing crisis – and there’s nothing that suggests that will change anytime soon. That’s why housing experts and inventory data tell us there isn’t a crash on the horizon.</p>
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