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

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

By Christophe Choo Posted Jul 08, 2024 Latest Updates, Market Activity, Real Estate Advice for Buyers & Sellers, Real Estate Articles, What I'm Reading

Not a Crash: 3 Graphs That Show How Today’s Inventory Differs from 2008 | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert

Even if you didn't own a home at the time, you probably remember the housing crisis in 2008. That crash impacted countless lives, and many now worry that something similar could happen again. But rest assured, things are different now. As Business Insider notes:

“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.”

Here's why experts are so confident. For the market (and home prices) to crash, there would have to be an oversupply of houses for sale, but current data shows an undersupply, even with inventory growth this year. The housing supply comes from three main sources:

  1. Homeowners deciding to sell their houses (existing homes)
  2. New home construction (newly built homes)
  3. Distressed properties (foreclosures or short sales)

Let’s break down these sources and see how they differ from the situation in 2008.

Homeowners Deciding To Sell Their Houses

The supply of existing homes is up compared to last year, but it's still low overall. Nationally, the current months’ supply is well below the norm and far below what we saw during the crash. The latest data shows we only have about a third of the available inventory today compared to 2008. This means there aren't enough homes available to make values drop significantly.

New Home Construction

There's a lot of talk about newly built houses and whether homebuilders are overdoing it. Despite new homes making up a larger percentage of the total inventory than usual, there’s no need for alarm. Builders have been underbuilding since the last crash and are now catching up. They remember the Great Recession well and have been cautious about their pace of construction, leading to an ongoing shortage of homes for sale.

Distressed Properties (Foreclosures and Short Sales)

The last place inventory can come from is distressed properties. During the housing crisis, there was a flood of foreclosures due to lax lending standards. Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. Data from ATTOM shows that as lending standards tightened, the number of foreclosures decreased significantly. Even with foreclosure volumes ticking up slightly, we're still below normal levels for a typical year.

What This Means for You

Inventory levels aren’t anywhere near where they’d need to be for prices to drop significantly and the housing market to 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, highlights the laws of supply and demand:

“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), reassures:

“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 there’s no indication that this will change anytime soon. That’s why housing experts and inventory data suggest there isn’t a crash on the horizon.

Additional Real Estate Insights for Los Angeles and Beverly Hills, CA

In the high-demand markets of Los Angeles and Beverly Hills, the situation is even more distinct. These areas are known for their luxury homes and competitive real estate environment. The shortage of inventory is particularly acute here, further stabilizing prices and reducing the likelihood of a market crash. Buyers in these markets can expect steady appreciation and strong investment opportunities, while sellers benefit from high demand and limited supply.

If you're considering buying or selling in Los Angeles or Beverly Hills, now is a great time to act. Contact us at 📱 310-777-6342 for personalized advice and market insights.

Call Christophe Choo at (310) 777-6342 to tour your future home "HERE" or click "HERE" to estimate your home value

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