No Crash In Sight

It’s no secret that the housing market has been struggling as of late. Home values have been falling and the number of homes sold has slowed down significantly. This has led many to believe that we are on the verge of another housing crash, similar to the one that occurred in 2008. 
However, there are a number of factors that suggest that a crash is not likely to occur in the near future. Despite the current slowdown, the housing market is still in a much better place than it was during the last crash.

Not the Great Recession

A whopping 41% of Americans believe that the housing market is going to crash in the next 12 months, according to a survey conducted by LendingTree. Even more unveiling is that 74% of those who think there will be a crash assume it will be as bad or worse than the “2008 housing market collapse." With so many persuaded that a crash is inescapable, does that mean that housing will collapse once again?

LOS ANGELES COUNTY ACTIVE LISTING INVENTORY 2021 & 2022 VS 2006 & 2007

The primary reason why a crash will not happen is that there simply are not enough available homes to purchase. When the inventory develops, it takes a lot longer to sell. When the unsold inventory climbs above 200 days, negotiations incline heavily in favor of buyers and home values fall quickly. The unsold inventory in Los Angeles County, according to the California Association of REALTORS®, achieved the highest point for 2022 in October at 123 days. The peak for 2021 was 63 days, much quicker than today. The 3- year average unsold inventory peak prior to COVID (2017 to 2019) was 136, slightly slower than today. In comparing today's unsold inventory to the two years leading up to the Great Recession, 2006 and 2007, the difference is stunning. The unsold inventory peak in 2006 was 288 days, and it was 590 in 2007.

Demand and Supply

Demand, the number of pending sales over the preceding month, reduced by 193 pending sales in the past two weeks, down 6%, and now totals 2,830, its lowest impression since April 2020, the initial lockdown of the pandemic. It is the lowest level for December since tracking started in 2012. Last year, there were 5,274 pending sales, 86% higher than today. The active listing inventory in the past couple of weeks nosedived by 546 homes, down 5%, and now sits at 9,711 homes, its biggest drop of the year and its bottommost level since June. Last year, there were 6,196 homes on the market, 3,515 fewer homes, or 36% less. The 3-year average prior to COVID (2017 to 2019) was 10,998, or 13% more.