You may have heard some recent chatter about the economy, and even concerns about a possible recession. When this kind of news starts circulating, it’s no surprise that people begin to worry about another housing market crash. If that’s you, take a deep breath—there’s no need to panic. The housing market is in a much different place today than it was in 2008.
Real estate expert Michele Lerner explains it well:
“A housing market crash happens when home values plummet due to a lack of demand for homes or an oversupply.”
With that in mind, here are two solid reasons why a crash is not on the horizon.
1. Demand for Homes Is Higher than Supply
One of the primary reasons the housing market crashed back in 2008 was due to an oversupply of homes. There were simply too many homes and not enough buyers, which drove prices down fast. Today, the story is very different.
It’s typically accepted that a balanced housing market has about a six-month supply of homes available. That means supply and demand are even. A supply above six months means there’s an oversupply, which can drive prices down, while a lower supply means demand exceeds supply, which keeps prices stable or even pushes them up.
Check out the chart below to see the big difference between then and now:
As you can see, the lead-up to the 2008 financial crisis had an oversupply of 13 months—more than double what’s considered balanced! Today’s market, on the other hand, has just 4.2 months of supply. In simple terms, there are more people wanting to buy homes than there are homes available. This keeps prices from plummeting, unlike in a housing crash.
It’s important to remember that inventory levels vary by location. Some markets might be more balanced, while others still face shortages. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), points out:
“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”
2. Unemployment Is Still Low
Another big factor behind the 2008 housing crash was the spike in unemployment. When people lose their jobs, they may struggle to make mortgage payments, leading to foreclosures, distressed sales, and falling home prices. Thankfully, we’re in a much better place today when it comes to employment.
Take a look at the chart below for a clearer picture of unemployment rates now compared to 2008:
Back during the 2008 crisis, unemployment soared to 8.3%, creating financial strain on many households. The 75-year average is around 5.7%, but today, we’re sitting at a much healthier 4.1%. People are working, earning, and able to make their mortgage payments, which significantly reduces the risk of foreclosures and distressed sales that were so prevalent during the last crash.
The Housing Market Today vs. 2008: A Vast Difference
While it’s normal to be cautious when you hear talk of economic uncertainty or a possible recession, today’s housing market is much stronger and more stable than it was in 2008. As Rick Sharga, Founder and CEO at CJ Patrick Company, puts it:
“Literally everything is different about today’s housing market dynamics than the conditions that led to the housing crisis.”
The combination of high demand and limited supply, along with low unemployment, makes a housing market crash highly unlikely anytime soon.
Bottom Line
The housing market is in a much healthier place than it was during the 2008 crash, but remember, real estate is local. Some markets may see slight declines, while others remain steady or continue to grow.
If you’re curious about how these factors are playing out in our specific market, or if you want to discuss your real estate goals, feel free to reach out. At DFW Elite Realty Group, we’re here to provide guidance and to help elevate your home buying (or selling) experience every step of the way. realtor, best agent, real estate, Southlake, Keller, Haslet, home buyer, home seller, home value, Trophy Club, Fort Worth, new home, house, home selling, seller tips, 4wheeltorhomes, 4wheeltor, Crystal Zschirnt, Westlake, Roanoke, Justin, Northlake, Flower Mound, Argyle, Texas
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