Should We Be Worried About New Home Supply Reaching 2009 Levels?

Lately, real estate news has been filled with headlines like "New Home Inventory at Its Highest Since 2009." This might have you thinking, “Are we going to see another housing crash like 2008?” But there's no need to worry just yet, as the situation we're facing today is very different from back then.

The Market Today is Different from 2008

It’s true that new home inventory levels are similar to those in 2009. However, that doesn’t necessarily mean we're headed for a crisis. In fact, 2009 marked the beginning of a slowdown in construction as builders scaled back after the overbuilding of the previous years. The real oversupply occurred between 2007 and 2008, and by 2009, new home construction had already dropped significantly. Therefore, seeing similar inventory levels today doesn't indicate we're

facing an oversupply.

A Lack of New Construction Over the Last Decade

In reality, the housing market has been under-supplied. After the financial crisis, builders reduced the number of new homes being built, and the market has been in a chronic shortage for over a decade. According to data from the U.S. Census Bureau, while there was oversupply before the 2008 financial crisis, supply has since fallen well below the needed levels. The increase in new home inventory today is simply a response to make up for that long-standing shortage.

Why More New Homes is Actually Good for Buyers

First American’s senior economist, Odeta Kushi, recently explained that the housing market, which had been undersupplied for so long, is now entering a phase of normalization. She sees this as a positive trend, offering more options to buyers, reducing competition, and making it easier to find a home.

Of course, market conditions can vary by location. Some areas may have a surplus of new homes, while others might still experience a shortage. But on a national scale, the current situation should not be interpreted as a crisis like in 2008.

Conclusion

The recent increase in new home inventory is nothing to fear. In fact, it’s a healthy correction to address the supply shortage that has persisted for over 10 years. If you're curious about how the market is affecting you or your area, it’s a good idea to consult a trusted local real estate expert to get a better understanding of the situation.