National Housing Market Outlook

Significant Swings in Competition

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John Burns

May 8, 2017

Is your local new home competition up 15% or down 10% over the last year? How much will it increase or decrease in the next year? In the last year, new home competition has:

  • Surged 15% or more in eight of the largest markets in the country, including Denver, Austin, Las Vegas, Orange County, CA, Salt Lake, Sacramento, San Francisco Bay Area, and Fort Lauderdale
  • Fallen 10% or more in three of the largest markets: Boston, Los Angeles, and Tacoma


In certain submarkets and price points the change has been even more dramatic. For example, most of Orange County’s 23% increase in competition has occurred in three locations in Southeastern Orange County, as shown in the map below.

Click to enlarge map

During a year of significant swings in the number of competitors, home builders have been reminded that sudden changes in new home competition, especially in the same submarket and price range, can substantially alter sales and profit margins. Nowhere has this been more prevalent than in the submarkets that include some of the fastest-growing masterplans in the country, where supply is already high.

While the combination of innovative new floor plans and increased marketing dollars usually increases overall sales in a market area, sales rates per community (and sometimes price) often fall due to the increased competition. Sometimes builders ignore the impact from future competition, other than actively selling masterplans, because the analysis of future competition is painstaking and prone to error, especially 2–3 years in the future. Even if you correctly identify the potential competition, how do you even know if the developer will sell it to a builder who has the capital to move forward?

To get the future competition right, we suggest visiting each city’s planning department and then estimating the timing of each future community based on your local knowledge. We recommend updating this information every year, too. In your pro forma, note the expected timing of increases or decreases in competition and adjust sales and price projections if appropriate. For some of our clients, this has helped them understand how aggressively to price the homes and has encouraged them to differentiate their designs from the competition.

For more information on great community analysis or if you expect increased competition soon, contact our consulting team members for advice.


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John Burns
Chief Executive Officer
As CEO, John grows, leads, and supports a team of passionate, articulate, likable, and smart experts. Together, we solve today so our clients can navigate to tomorrow.

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