Looking at the data proves that the housing market isn’t crashing.


Today's housing inventory proves the market isn't headed for a crash. Whether or not you owned a home in 2008, you likely remember the housing crash that took place back then, and news about an economic slowdown happening today may bring back those concerns and bring everything back to the surface. Now, while those feelings are understandable, data can help reassure you that the situation today is nothing like it was in 2008.


One of the key reasons why the market won't crash this time is the current undersupply of inventory. Housing supply comes from three key places: one, current homeowners putting their homes on the market up for sale. Two, newly-built homes coming onto the market. Three, distressed properties, which consist of short sales and foreclosures. For the market to crash, you'd have to make a case for an oversupply of inventory headed to the market, and the numbers just don't support that.


So let's take a deeper look at where inventory is coming from today. This will help prove why the housing market isn't headed for a crash. The first one is current homeowners putting their homes up for sale. Even though the housing supply is increasing this year, there's still a limited number of existing homes available. Look at the graph at 1:21 in the video, and it'll help illustrate the point. Based on the latest weekly data, inventory is up 27.8% nationally compared to the same week last year, which is shown in blue. Compared to the same week in 2019, which is in red, it's still down by 42.6%. So what does this mean? Inventory is still historically low. There are still more buyers and sellers, and there simply aren't enough homes on the market to cause prices to crash. There would need to be a flood of people getting ready to sell their houses in order to tip the scales toward a buyer's market, and that level of activity simply isn't there.


The second factor is newly-built homes. There's also a lot of talk about what's happening with newly-built homes on the market, and that may make you wonder if we're overbuilding. Still, the fact is we're noticing that homebuilders are slowing down their production rate now. They're being very intentional about not overbuilding homes as they did during the 2008 bubble.


"The factual data can help reassure you that the situation today is nothing like it was in 2008."


The third place inventory comes from is distressed properties—short sales or foreclosures. We do not have very many foreclosures and I don’t see that happening any time soon. Most homeowners in Arizona have a lot of equity. This allows them to sell traditionally and still come out ahead if they get into financial trouble. If they were upside down in equity they would have to participate in a short sale or the mortgage company would foreclose. Back in the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to secure a home loan they couldn't truly afford. Today, lending standards are much tighter, and this results in more qualified buyers and far fewer foreclosures—certainly very few in the Phoenix market. The graph at 2:51 in the video uses data from Adam Data Solutions on properties with foreclosure filings. This should help paint a picture of how things have changed since the crash. The graph shows how, in the time around the housing crash, there were over one million foreclosure filings per year. As the lenders and the lending standards tightened since then, you'll see the activity starting to decline. 


The 2020 and 2021 forbearance programs—those helped to prevent a repeat of the wave of foreclosures that we saw in 2008. The forbearance program was a game changer because it gave homeowners options they never had before; they can defer their loans or modify loans, which appears to have been successful. It shows that four out of every five homeowners come out of forbearance; either they were paid in full or they worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won't be a wave of foreclosures coming to the market. 


The bottom line is this: Although housing supply is growing this year, the market certainly isn't anywhere near the inventory levels that would cause prices to drop significantly or crash. That's why inventory tells us the housing market won’t crash. I've been in this business for 33 years now. I've been through three cycle changes. I've been through the foreclosures of 2007 and 2008. I can tell you that we are nowhere near a crash, and I don't see it happening. There just aren't enough houses on the market.


I know that there's a lot of data here. If you have any questions about the market or real estate in general, don’t hesitate to reach out by phone, email, or click this link to submit a contact request. We look forward to hearing from you soon.