No, there will NOT be a 2008-style housing market crash, and here's why

March 29, 2021

We are in a very odd market these days, where sellers can mostly name their prices, and homes sell within a week.  It is extremely frustrating for buyers, who often have to RUSH to view a home and write an offer just to have a shot.  It's hard to imagine a stronger seller's market than we're seeing almost everywhere in the US.

These strange times have prompted some folks to speculate that we'll see another 2008-style housing crash.  After all, prices are going up, and what goes up must come down, right?

As the kids say these days, "cool story, bro."  And here's why.

  1. You can't have a market crash with low inventory. Repeat.  You can't have a market crash with low inventory.  There's always SOMEONE who needs to buy a house, and if there aren't many homes to choose from, guess what happens?  Sellers get their price.  And take a look at inventory vs asking prices (CHPI).
  2. Current mortgage loan profiles are very healthy.  Meaning, homeowners have much better credit and more equity than they did in the run-up to 2008. This makes foreclosures FAR less likely, and even  when they do happen, there's equity.
  3. No, we aren't in a bubble. Prices have definitely gone up, but if you adjust for inflation, we're far below what we saw in 2008.
  4. COVID-related forbearances never became a crisis, and continue to drop.  Some of the "housing crash Bros" predicted these forbearances would take us back to an '08-style situation.  Nope.
  5. Housing-starts (new construction) are up, up, up. Builders are very bullish right now, and building permits in December 2020 were up 17% over 2019.  Ask anyone in the real estate business and they will tell you we NEED more inventory!

Still not convinced?

  • As of today (March 29, 2021), there are 277 single-family homes for sale in Alachua County that are not already under contract.
  • Over the past year, about 280 homes have sold every month in Alachua County.
  • That means we are currently at about 1 month of inventory.  To get to a "balanced" market -- meaning a NORMAL amount of inventory, neither a buyer's nor a seller's market, we'd need 5 more months of inventory, or 1,400 new listings.  And to get to a point where there's any sort of price crash, we'd need a lot more than that -- closer to 2,200 new listings.

To summarize, we are about as close to a housing market crash as we are to getting snow in July.  Yes, the market will shift and we won't be in a seller's market forever.  But a "crash" like we saw in 2008?  Not a chance.

Credit to @LoganMohtashami for the graphics

Other blog entries

Gainesville issues $25K grants for potential homebuyers in black communities (04/13/2021)
Ex Butler leasing manager joins forces with Celebration Pointe (03/08/2021)
Gainesville breakfast hotspot moving down the street (02/16/2021)
Taco Del Mar closes down in Gainesville (01/04/2021)

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