A growing list of doomsayers point to the shifting market as taking us one step closer to a bursting housing bubble. In their minds, housing went up too fast and now must come back down. But what does the data say? When you look under the hood, the run-up to 2008 housing bubble and the hot 2021 housing market are very different bull markets.
While there are several reasons why our latest frenzy won’t result in a bust, there’s one reason in particular that really stands out. A supply glut is unlikely to return anytime soon.
Burned by the 2008 crisis, homebuilders have been extremely conservative in recent years. In the eight years leading up to the Great Recession, homebuilders averaged 1.7 million monthly housing starts. Meanwhile, over the past eight years (2013 to 2021) they’ve averaged just 1.2 million per month.
The problem? Recent levels of building aren’t growing fast enough to keep up with population growth. Indeed, our nation is under-built by about 3.8 million single-family homes, according to Freddie Mac. Between April 2020 to April 2021, housing inventory fell over 50%. Though it has since ticked up, we’re still near a 40-year low.