Why the Housing Market is More Stable Than You Think

If you remember the 2008 housing crash, it’s understandable to feel cautious about the current market. That crisis impacted countless lives, and the fear of another crash still lingers for some. But today’s housing market is very different from back then. As experts point out, the odds of a similar crash happening again are slim.

In fact, economists specializing in real estate are overwhelmingly confident that we’re not headed toward a crash anytime soon. According to Business Insider, despite concerns from some Americans, economists agree that the housing market is far more stable than it was in 2008.

What Makes the Current Market Different?

For a housing market to collapse, there typically needs to be an oversupply of homes—too many homes for sale and not enough buyers. But that’s not the case today. In fact, we’re facing a shortage of homes, even with the slight uptick in inventory we’ve seen this year. Here’s a closer look at why.

1. Homeowners Are Not Rushing to Sell

While there are more homes on the market now compared to last year, the overall supply remains much lower than historical averages. Even though conditions can vary by region, the national inventory is well below what it was leading up to the 2008 crash. To put it simply, there just aren’t enough homes available to trigger a significant price drop.

2. New Home Construction is Still Catching Up

Some people might wonder if the increase in new home construction could lead to oversupply. However, there’s no need to worry. Builders are still playing catch-up from years of underbuilding after the last crisis. While new homes do make up a bigger chunk of the current market, we’re far from the overbuilding levels seen before 2008. Homebuilders, having learned from the past, are being cautious, ensuring they’re not overextending themselves.

As Bankrate explains, homebuilders remember the lessons of the Great Recession well and have adjusted their building strategies accordingly, contributing to the continued shortage of available homes.

3. Distressed Properties are Not Flooding the Market

One of the major factors behind the 2008 crash was the flood of distressed properties, including foreclosures and short sales, due to loose lending standards. Today, the situation is much different. Lending practices are much stricter, and homebuyers are more qualified, reducing the risk of default. While you might hear about an increase in foreclosure activity, it’s essential to remember that we’re still below the typical levels seen in a healthy market.

What Does This Mean for Buyers and Sellers?

With inventory levels still low and demand high, home prices are not expected to drop significantly anytime soon. As Forbes notes, while home prices remain elevated, the likelihood of a sudden crash remains low.

Mark Fleming, Chief Economist at First American, emphasizes that basic supply and demand dynamics are at play: there are more people looking for homes than there are homes available. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), agrees, stating that today’s market conditions—tight supply and cautious lending—make a repeat of the 2008 crisis highly unlikely.

Bottom Line

The fear of another housing crash is understandable, but the current market conditions suggest that we’re not heading down that road. Inventory remains low, lending practices are much stricter, and homebuilders are cautiously increasing supply. All of these factors point to a stable market in the near future. So whether you’re looking to buy or sell, it’s reassuring to know that experts don’t see a crash on the horizon.