Housing market inventory hit a 4 million home glut before the 2008 crash. We’re nowhere close to that now

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The thinking behind housing market forecasts goes something like this: If inventory begins to rise quickly as buyers pull back, and listings pile up, in theory it signals a weakening market. Conversely, if inventory begins to fall quickly as homes sell faster, in theory it signals a strengthening housing market.



By the time the U.S. housing market was in full-blown crash mode in 2008, active housing inventory for sale had climbed to 4 million. But we are nowhere close to that right now. Currently that number is around 718,000 homes for sale.



The fact that there isn’t an excessive amount of existing inventory on the national market is the primary reason spiked mortgage rates and strained affordability haven’t translated into more regional home price corrections.



Realtor.com has just published its inventory reading for December. Let’s take a closer look at the national topline data.







In December 2023, there were 714,176 active listings on Realtor.com. That’s 5% above December 2022 (679,650 active listings), and 61% above the height of the pandemic housing boom in December 2021 (442,930 active listings), when many homes were selling so fast they weren’t even being registered as inventory.



But it’s still well below pre-pandemic levels: Active listings in December 2023 were 31% below December 2019 levels, when there were 1,032,397 homes for sale in the U.S. It’s typical to see a seasonal decrease in inventory from November to December, but in December 2023, inventory dropped by just 40,670 homes—much less than we’ve seen in previous years.







Big picture: The smaller than normal seasonal inventory decrease in December suggests that the resale housing market underwent a more pronounced seasonal cooling than usual for the end of the year, influenced by strained affordability. However, national inventory levels still remain below pre-pandemic levels, suggesting more of a balancing housing market than a crashing one.







Unlike the first two charts, which show U.S. active listings (i.e., every home for sale in a given month), the third chart (directly above) shows new listings in the U.S. (i.e., homes coming on the market in a given month).



On the new listing front, there’s some good news for agents and others who make their money on resale transactions: It appears that the lock-in effect is easing up. While there were still 31,928 fewer new listings in December 2023 (235,584) compared to December 2019 (267,512), that so-called listing deficit is smaller now than it was last year; December 2022 had 46,720 fewer new listings (220,792) than December 2019.



That suggests that some sellers, who, out of affordability concerns, put off selling to buy something new, might go ahead and make the move in 2024 as they come to terms with the fact that 3% and 4% mortgage rates aren’t coming back anytime soon.