Cervone Deegan + Associates knows that everyone likely remembers the housing crash of 2008 regardless of whether you owned a home or not during that time. The news circulating these days about an economic downturn stirs concern by many that we could be heading for the same thing we had back then. However, we can look at some important data that proves that today’s housing market is not like it was then and one of the key factors is inventory.
Today’s undersupply of newly built homes, existing homes being listed by sellers and distressed properties are far from saturating the market which makes it unlikely to crash. Here is a closer look at each of these segments.
Current Homeowners Listing For Sale
Regardless of inventory increasing these days, there are still very few homes on the market for sale. According to data from Calculated Risk, inventory for the third week of August was 27.8% higher than last year in 2021 but 42.6% lower than that of 2019. What this indicates is there isn’t enough housing stock to tip the scales to where home prices would fall resulting in a market crash.
Newly Constructed Homes
New construction is also going at a slower pace than it was during the last bubble. Ali Wolf, Chief Economist at Zonda, states “It has become a very competitive market for builders where they are trying to offload any standing inventory.” Builders are responding to the mortgage rate increases and slowing their production rate where they are being cautious about overbuilding.
Another area where a glut of inventory can come from is distressed properties which include short sales and foreclosures. During the last housing crisis, there were many of these due to lax lending standards whereas today’s market is completely different and more strict. According to ATTOM Data Solutions in 2009 there were 2.8M foreclosure filings whereas in 2021 there were only 151k which is far less. In recent years the forbearance program was further assistance to help prevent another wave of distressed properties like we saw around 2008.
All in all these trends and numbers show us that supply is not anywhere near where it would need to be for a crash to be in our near future.