You may have noticed that the number of homes on the market has surged recently. This could lead you to wonder if we are on the brink of another housing market crash.

The truth is, the data shows otherwise. In many areas, having more inventory isn’t a negative thing. In fact, it indicates that the market is heading back to a more stable and healthy state.

What’s Going on With Inventory?

According to the latest data from Realtor.com, inventory has reached its highest level since 2020, as indicated by the white line in the graph below.

It's important to understand that, even now, inventory levels haven’t bounced back to what they were before the pandemic.

There are currently more homes available for sale than we've seen in a long time.

Inventory has definitely increased a lot compared to the last few years, but there are still far fewer homes on the market than what's considered normal. That’s an important detail to keep in mind.

Why This Isn’t the Problem A Lot of People Think It Is

Some folks hear that inventory is rising and instantly recall 2008, when a spike in inventory coincided with a market crash. However, the current situation is quite different.

The main point is that we’re not looking at an excess of homes; instead, we face a significant shortfall. What we’re truly grappling with is a long-term housing shortage, and it's a substantial challenge to overcome.

The red bars in the graph below highlight the years since 2012 when new housing starts lagged behind household formation. The taller the bars, the larger the housing deficit became. Check out the graph for a visual representation.

One reason the housing shortage keeps getting worse is that new home construction hasn't matched the growing number of people looking to buy homes. Right now, the U.S. is missing millions of homes, and it will take years to close that gap. According to Realtor.com, the situation is quite significant.

““At a 2024 rate of construction relative to household formations and pent-up demand, it would take 7.5 years to close the housing gap.”
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— Realtor.com

In most areas, there isn’t a concern about having too many houses available right now. In fact, it's the opposite – many markets really need more homes.

Even though we’re seeing more homes available, it isn’t causing major issues nationally. It’s simply helping to close a gap that’s developed over the years.

Bottom Line

Don’t be alarmed by the headlines. An increase in inventory doesn't mean a crash is coming. It's actually a move toward a healthier, more stable housing market.