Why Denver's 2024 Real Estate Market Won't Crash Like 2008

Even if you didn’t own a home back then, you probably remember the 2008 housing crisis. It was rough and left a lot of people scarred, making many folks worry about a repeat. But here’s the good news – things are not the same as they were back then. Business Insider nails it:

“Though many Americans believe the housing market is at risk of crashing, the economists who study housing market conditions overwhelmingly do not expect a crash in 2024 or beyond.”

So, why are the experts so confident? For a crash to happen, there'd have to be an excess of homes for sale, driving prices down. But that’s not what’s happening today. In fact, we have a shortage, even with the inventory growth this year. The housing supply mainly comes from three places:

1. Homeowners selling their houses (existing homes)
2. New home construction (newly built homes)
3. Distressed properties (foreclosures or short sales)

Let’s break down these sources and see why we’re not headed for another 2008.

Homeowners Deciding To Sell

The supply of existing homes is up from last year, but it’s still low overall. On a national scale, the current months’ supply is below the norm and way below what we saw during the crash. Check out the graph below.

Notice the difference? We’ve only got about a third of the inventory available today compared to 2008. This means there just aren’t enough homes out there to drive prices down. For a repeat of 2008, we’d need a flood of homes for sale with few buyers – and that’s not happening now.

New Home Construction

New homes are a bigger chunk of the total inventory than usual, but don’t worry. Builders aren’t overdoing it. They’re playing catch-up. The graph below shows the number of new homes built over the last 52 years.

See that orange spike before the crash? That was overbuilding. The red part shows builders have been underbuilding since then. They’re just trying to fill the gap now. As Bankrate puts it:

“What’s more, builders remember the Great Recession all too well, and they’ve been cautious about their pace of construction. The result is an ongoing shortage of homes for sale.”

Distressed Properties

During the crisis, a lot of homes hit the market through foreclosures and short sales due to poor lending standards. Nowadays, lending standards are tighter, meaning buyers are more qualified and foreclosures are fewer. The graph below illustrates this change.

As you can see, foreclosures have significantly decreased. While there’s been a slight uptick recently, it’s still below normal levels. Today’s market isn’t flooded with distressed properties like it was in 2008.

What This Means for You

The inventory isn’t nearly high enough for a crash. Forbes explains it well:

“As already-high home prices continue trending upward, you may be concerned that we’re in a bubble ready to pop. However, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.”

Mark Fleming, Chief Economist at First American, highlights the basic principle of supply and demand:

“There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101.”

And Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), confirms:

“We will not have a repeat of the 2008–2012 housing market crash. There are no risky subprime mortgages that could implode, nor the combination of a massive oversupply and overproduction of homes.”

Bottom Line

We’re not headed for another 2008. The market doesn’t have enough homes to spark a crash. Experts and the data agree – a crash isn’t on the horizon.

So, if you’re thinking about buying or selling, now’s a great time. Don’t let the ghost of 2008 spook you. The market is in a completely different place today. If you have any questions or need advice, hit me up. I’m here to help you navigate the Denver real estate market like a pro. Let's go!