Why the Housing Inventory of Today Doesn’t Show a Crash on the Horizon
Even if you did not own a house at the time, you may remember the 2008 housing crash. There’s good news for those who are worried about a repeat. The housing market is very different today from 2008. One important reason is that there aren’t as many homes available. There’s a shortage of homes for sale, not an excess like last time. The market would need to crash if there were too many houses on the market, but the data does not show this.
Newly constructed homes
Distressed Properties (foreclosures, short sales or foreclosures)
The housing inventory is still low, even though it has grown compared to the previous year. The current months’ housing supply is below normal. This is shown in the graph below. What does this mean? There are not enough homes to cause home values to drop. Newly Built HomesPeople talk a lot these days about what’s happening with newly built homes, which might make you question if homebuilders have overdone it. The graph below shows how many new houses were built in the last 52 years. The 14 years of underbuilding are a major reason for the low inventory today. The graph below shows the number of new homes built over the last 52 years. The 14 years of underbuilding (shown in red) is a big part of the reason why inventory is so low today. This is because there’s a huge gap to fill. Distressed Properties, including Short Sales and Foreclosures, are the last source of inventory. The housing crisis saw a flood in foreclosures because lending standards were looser. Today, lending standards are tighter and there are fewer foreclosures. The graph below shows how things have changed in the years since the housing crisis: This graph illustrates that as lending standards tightened and buyers became more qualified, the number foreclosures began to decrease. In 2020 and 2021 the combination of a forbearance and a moratorium on foreclosing helped prevent a repetition of the wave we saw in 2008. The forbearance was a game changer and gave homeowners options like loan deferrals or modifications that they did not have before. Four out of five homeowners who exited forbearance had either paid their mortgages in full or worked out a repayment schedule to avoid foreclosure. What This Means For YouInventory levels don’t even come close to what they would need to be to cause prices to drop and the housing market crash. Bankrate says that this is not going to change any time soon, especially since buyer demand is still high: “This ongoing lack of inventories explains why many consumers still have no choice but to bid higher prices.” It also shows that the supply and demand equations will not allow a crash in the near term. Housing inventory is a good indicator that a crash is not imminent.
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