It’s been accepted for the last few years that housing supply hasn’t been able to keep up with demand, contributing to large gains in home prices nationwide—but how do the numbers break down, and how do specific groups of buyers and sellers balance against each other? John Burns, CEO of John Burns Real Estate Consulting [1], explored the topic in a recent piece.
Excluding homeowners who buy and sell within the same market (essentially adding and subtracting one home from that area), Burns isolated six “buyers-only” and eight “sellers-only” categories, many of which match or are related to each other:
- First-time buyers versus end-of-lifers: While the number of first-time buyers is currently lower than usual, Burns notes first-timers “usually greatly outnumber the number of people ending their tenure of homeownership,” meaning those groups are still imbalanced.
- Divorcees versus newlyweds: The number of divorcees is also down, while the number of newlyweds (who add to supply by shedding one of their homes) is up. However, “[d]ivorcees often end up owning two homes,” Burns explains—so they weigh heavier on the scale of supply and demand.
- New migrants and immigrants versus out-migrants: A simpler equation than the others: Immigrants and in-migrants outnumber out-migrants.
- Those buying a second home versus those selling one: Second-home ownership has been on the rise in recent years, but during slow economic times—such as these—sellers outnumber buyers as more people cut luxuries to make ends meet.
- Buyers moving up/down (while keeping their prior home) versus homeowners choosing to rent: Far more buyers are moving up and holding on to their home as investments, while “[f]ew homeowners voluntarily convert to renters,” Burns says.
- Investors (both sides): Investor activity has been high the last few years, creating a huge impact on the market.
The remaining two categories are banks, which have been selling three times as many homes lately as normal (contributing to supply), and builders, who can serve as an equalizing force by creating more supply as demand warrants—but who haven’t been as active as normal.
The result: As expected, a scale tipped heavily against buyers.
“Right now, we believe more buyers than sellers will result in another year of price appreciation in most markets,” Burns says.
“However, we see huge differences by market,” he adds. “We are carefully monitoring supply in Texas and affordability in California and projecting very different years in each market and submarket.”