PodcastNational Housing Market Outlook

Buckling Our Seatbelts for an Interesting Ride: John Burns on Current Market Conditions

Dean Wehrli
Shelly Chen

Dean Wehrli

Shelly Chen

June 3, 2022

The residential real estate market has been speeding uphill since mid 2019, with a speed bump in the Spring of 2020. As we near the peak, anticipation of what is on the other side anxiously awaits. When will we pass the peak? How steep is the grade going downhill? Are there guardrails? On this week’s podcast episode, John Burns, Founder and CEO of John Burns Research and Consulting, gives us his take on today’s housing market and what our team believes is the most likely scenario going forward. Keep reading below for some of his key takeaways.

Featured guest

John Burns, CEO, John Burns Research and Consulting

Shape of the current market

  • Demand remains strong, with some clear signs that demand is beginning to cool.
 
  • First-time buyers have clearly been impacted the most by recent price appreciation and mortgage rate increases.
 
  • The lack of supply is staggering, with both resale and completed new home supply more than 80% below norm. Lack of supply will provide a big cushion if demand falls dramatically.

Safeguards against uncertainty

  • Very little money has gone into land development, limiting future lot availability. This will constrain future new home supply.
 
  • Large home builders are now developing their own land, partially financed by land bankers.
 
  • Big builders have also taken advantage of historically low interest rates and turned to the bond market. The top seven builders have about $25B in debt, with less than half due in the next 5 years.

Prepping for the future

  • Although the market is cooling, market conditions appear more like the conditions around 1980/1981 and 2000/2001 as opposed to 2006–2008.
 
  • Keep a close eye on these key metrics: months of supply and employment growth. Months of supply determines the direction of price. Employment losses will signal trouble ahead.
 
  • Rents will continue to grow, though some apartment and rental home submarkets could be at risk of oversupply.

This episode was recorded on May 31, 2022.

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About The Author

Dean Wehrli
Dean Wehrli
Principal
Dean helps housing sector clients figure out not just what might work and what might not, but why.
Shelly Chen
Shelly Chen
Research Analyst II, For-Sale
Shelly is responsible for working on various research projects as it relates to residential for-sale, including supporting our Burns Home Builder Analysis and Forecast report.

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