The current housing market is showing low levels of distressed properties. Bankruptcy and foreclosure rates remain at historic lows compared to the past two decades. The data reveals only 47,000 foreclosures in Q2 2024, a fraction of what we saw during previous market challenges. This stark contrast to the 2008-2009 period demonstrates the fundamental strength of today's market.

Financial distress indicators, traditionally leading signals of market trouble, are absent. Both bankruptcy filings and foreclosure rates continue to track well below historical averages, indicating stable household finances and strong payment performance across the mortgage landscape.

The Inventory Reality Check

New single-family home listings in 2023 and 2024 have reached some of the lowest levels in recent history. Weekly listings average around 30 new homes, compared to the 250,000 to 400,000 range seen during 2009-2011. This difference in available inventory creates a completely different market dynamic than previous challenging periods.

The current supply shortage represents a structural market condition rather than a temporary anomaly. With new listings running at approximately one-third of previous challenging market periods, the supply-demand balance remains tilted toward sustained market stability.

Equity Position: A Foundation of Strength

Today's homeowners stand on solid financial ground, with 40% of American homes completely free of mortgages. Of those with mortgages, many maintain loan-to-value ratios under 50%, representing significant equity positions. This contrasts sharply with 2010, when over 23% of listings represented underwater properties.

The current market shows only 1.7% of homes underwater on their mortgages, meaning 98.3% of homeowners maintain positive equity positions. This widespread equity creation has become a cornerstone of American household wealth, providing homeowners with financial flexibility and security that was notably absent in previous market downturns.

Historical Context Matters

The U.S. housing market has demonstrated resilience over the past eight decades. In 74 out of the last 82 years, real estate has shown positive growth. The often-mentioned 2008 crash represents the only significant deviation from this pattern since 1942, making it an historical anomaly rather than a predictive model for future market behavior.

Rising interest rates have not triggered the price collapse many predicted. The market has adapted to rate changes while maintaining price stability, supported by strong fundamentals and limited supply. This resilience reflects the market's ability to adjust to changing conditions without sacrificing underlying value.

Bottom Line

The current housing market stands on fundamentally different ground than previous challenging periods. The combination of strong equity positions, limited inventory, and historically low distress levels creates a stable environment unlikely to experience significant price deterioration. While market conditions may shift and adjust to economic factors, the core elements that typically precede major market corrections - widespread distressed sales and excessive inventory - remain notably absent from today's housing landscape.