As we navigate through 2024, many people are wondering about the state of the housing market and whether we're headed towards another crash. With memories of the 2008 housing crisis still fresh in our minds, it's natural to be cautious.

However, there are several compelling reasons why a housing market crash is unlikely in the near future. In this blog post, we'll explore five key factors that support the stability of the housing market in 2024. We'll look at historical data, current market conditions, and expert insights to provide a comprehensive understanding of why a crash is improbable.

Historical Rarity of Housing Market Crashes

When examining the history of the housing market, it's important to note that crashes are relatively rare. Over the past 81-82 years, housing prices have only declined in 7 of those years, with 5 of those years occurring during the Great Recession. This means that, on average, housing prices have consistently risen over time.

The unique circumstances that led to the 2008 housing crisis, such as loose lending practices and widespread subprime mortgages, are not prevalent in today's market. Stricter regulations and more responsible lending have helped to create a more stable foundation for the housing market.

Lack of Inventory

One of the primary reasons why a housing crash is unlikely in 2024 is the current lack of inventory in the market. When there is a limited supply of homes available for sale, prices tend to remain stable or even increase. This is because the demand for housing often outpaces the supply, creating competition among buyers.

Despite concerns about a potential surplus of inventory flooding the market, there is no data to suggest that this is likely to happen. In fact, many areas across the country are still experiencing a shortage of available homes, particularly in desirable locations.

Market Resilience Amidst Elevated Interest Rates

Over the past 1-2 years, interest rates have been elevated compared to the historic lows seen in previous years. Despite this, home prices have continued to rise when looking at nationwide data. This suggests that the housing market is resilient and can withstand shifts in interest rates.

While higher interest rates may impact affordability for some buyers, they have not led to a significant decrease in demand or a drop in prices. As long as the economy remains stable and unemployment rates stay low, the housing market is likely to maintain its strength.

Strong Homeowner Equity Positions

Another factor contributing to the stability of the housing market is the strong equity positions of current homeowners. Data shows that around 89% of the country has a 5% or less "handle" on their mortgage, meaning they have significant equity in their homes. Additionally, approximately 30% of mortgages in the U.S. are free and clear, indicating that many homeowners have paid off their mortgages entirely.

These strong equity positions provide a buffer against potential market fluctuations. Homeowners with substantial equity are less likely to face foreclosure or be forced to sell their homes at a loss, even if market conditions change.

Differences from the 2008 Housing Crisis

It's essential to recognize that the current housing market is fundamentally different from the conditions that led to the 2008 housing crisis. The lending practices, regulatory environment, and economic factors that contributed to the previous crash have largely been addressed and reformed.

Today, lenders are more cautious in their approvals, and there are stricter guidelines in place to prevent irresponsible borrowing. Additionally, the overall economy is in a stronger position, with low unemployment rates and steady job growth.

Bottom Line

While it's natural to have concerns about the housing market, the evidence suggests that a crash is unlikely in 2024. The combination of historical data, current market conditions, and expert insights all point towards a stable and resilient housing market. By understanding these factors, both buyers and sellers can make informed decisions and feel confident in their real estate transactions.