Skip to main content

Two Reasons Why the Housing Market Won’t Crash

You might have caught wind of some concerns about the economy and whispers of a looming recession. It’s natural for such discussions to raise fears about a potential housing market downturn. If you’re feeling uneasy, here’s some reassurance: there’s no imminent danger of a housing market crash in the Triangle Area.

Real estate journalist Michele Lerner says:

A housing market crash happens when home values plummet due to a lack of demand for homes or an oversupply.”

Keeping that definition in mind, let’s discuss two reasons why a market crash isn’t expected anytime soon.

1. Demand for Homes Is Higher than Supply

A major factor behind the housing market crash in 2008 was an oversupply of homes available. Today, the situation is quite different.

A healthy market is typically characterized by a six-month supply of homes. A higher figure indicates an oversupply, while a lower figure suggests higher demand. The following graph, based on data from the National Association of Realtors, illustrates the current market context:

Housing Market Graph showing the housing demand still outpaces supply

The graph shows the housing supply during three different periods. The red bar indicates a 13-month supply pre-2008 crisis, signaling an excess. The gray bar shows a balanced market with a six-month supply. The blue bar demonstrates today’s situation: only 4.2 months of supply.

This indicates that there are more buyers than there are homes available, which keeps demand higher than supply. This imbalance typically leads to stable or increasing home prices—opposite of what happens in a crash.

Inventory levels vary by region; some areas might be more balanced, and others might slightly lean towards oversupply, which could locally impact prices. However, Lawrence Yun, Chief Economist at the National Association of Realtors, states:

Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

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

Employment is a critical factor; when people are jobless, they struggle with mortgage payments, potentially leading to sales under distress or foreclosures. This was a significant issue in the 2008 financial crisis. Currently, the employment situation is far more stable, as shown in the graph below:

Housing Market Graph showing unemployment is still very low

This graph displays unemployment rates during different periods: the 2008 crisis at 8.3%, the 75-year average at 5.7%, and today’s rate at just 4.1%.

With most people employed and managing their finances, the conditions that led to the foreclosure surge in 2008 are not present. Furthermore, high employment supports robust home buying activity, keeping prices on an upward trend.

Today’s Housing Market Is Stronger than in 2008

While economic uncertainty can be unsettling, it’s important to recognize that the housing market is in a much stronger position compared to 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 ongoing high demand for Raleigh homes and sustained low unemployment are key indicators that support the stability of the housing market.

Bottom Line

The housing market has significantly improved since 2008. Remember, real estate is very localized.

It’s always wise to stay informed about your specific market conditions. If you have questions or need to discuss how these factors play out locally, feel free to contact Linda Craft Team Realtors.

Leave a Reply