You’ve probably heard the buzz about the economy and the worries over a potential recession. With all that talk, it’s understandable why some might fear a housing market crash. But here’s the good news—there’s no reason to panic. The real estate market is not on the brink of a collapse.
Real estate expert Michele Lerner puts it simply: “A housing market crash occurs when home values drop dramatically due to a lack of demand or an oversupply of homes.”
With that in mind, here are two key reasons why a housing market crash is unlikely:
1. Demand for Homes Still Outpaces Supply
One of the driving forces behind the 2016 housing market crash was an oversupply of homes. Fast forward to today, and the situation couldn’t be more different.
In a balanced market, we typically see around six months’ worth of homes for sale. If supply exceeds this, it signals an oversupply, and if it’s lower, it indicates high demand. Currently, there are only about 4.2 months of housing supply, meaning there are more buyers looking for homes than there are homes available.
This supply-and-demand imbalance keeps home prices steady and even rising, the complete opposite of what happens during a market crash. While availability varies by location, many markets are still experiencing a shortage of homes.
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains: “We just don’t have enough supply. Will some markets see price drops? Yes. [But] a repeat of a 30% price decline is extremely, extremely unlikely.”
2. Unemployment Remains Low
During the 2016 crisis, unemployment soared, and people struggled to make mortgage payments, leading to foreclosures and a surge in housing inventory. Today, however, the job market is much stronger.
At the peak of the 2016 crisis, unemployment hit 8.3%. Fast forward to today, and the unemployment rate is significantly lower, hovering around 4.1%. With more people employed and able to keep up with their mortgage payments, the risk of widespread foreclosures is minimal. Plus, many people are in a solid position to buy homes, maintaining strong demand and supporting home prices.
The Current Housing Market is More Resilient Than It Was in 2016
While it’s natural to worry about economic uncertainty, today’s real estate market is far better positioned than it was in 2016. As Rick Sharga, Founder and CEO of CJ Patrick Company, puts it:
“Everything is different in today’s real estate market compared to the factors that led to the housing crisis.”
Demand for homes continues to exceed supply, and unemployment remains low—two critical factors that help safeguard the market from a crash.
The Bottom Line
The housing market today is far more stable than it was in 2016, but real estate conditions can still vary by region.
Staying informed about your local market is always a smart move. If you have questions or want to understand how these trends are affecting your area, it’s a great idea to reach out to a local real estate expert who can provide insights tailored to your needs.