National Housing Market Outlook

Shining Light on the Bubble Discussion

Lesley Deutch photo
Ken Perlman Headshot
John Burns photo

Lesley Deutch

Ken Perlman

John Burns

April 30, 2021

In 2013, we collaborated with our clients to identify ten quantitative and ten qualitative signs of a housing bubble. Each year, we review those signs to gauge where we are in the cycle. Today, eleven of the bubble signs are visible. While the risks in the housing market are increasing, so are the opportunities for success. What opportunities exist in this hyper-competitive housing market?

  • Make a ton of money. This is the time of the cycle when fortunes are historically made. Our clients are looking for opportunities to expand their land holdings and increase their market presence. Builders are pushing prices rapidly (15% year over year)—in part a function of rising costs but clearly a function of enhanced demand. Apartment developers are seeing suburban expansion opportunities. Build-to-Rent operators are experiencing insatiable demand for new product (from renters and capital providers).
 
  • Manage your balance sheet. This is the time of the cycle when companies structure their debt to align with their assets. The publicly traded companies have already done that in two ways:

    1. By securing fixed-rate debt that does not mature for several years

    2. By purchasing land with option agreements that reduce profits a bit but allow the flexibility to minimize losses if the market corrects

  • Grow. Demand vastly exceeds supply right now. The market needs more supply. The challenge is to provide affordability for the homebuyer and renter.
 
  • Diversify. Some companies are building rental homes or aligning with rental home buyers. This is highly profitable today and offers downside protection if mortgage rates rise. Other companies are expanding into new geographies. Local markets always behave differently.
 

Here is a three-minute excerpt from last month’s client webinar. Please let us know if you disagree with our assessment of the 20 signs. Our expert team is always available for inquiries and great ideas on how to succeed.

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About The Author

Lesley Deutch photo
Lesley Deutch
Managing Principal
Lesley has more than 25 years of experience consulting with executives in the finance and real estate industries throughout North America. She works across a wide spectrum of industries including apartments, for-sale housing, high-rise development, urban projects, single-family rental, building products, and commercial developments.
Ken Perlman Headshot
Ken Perlman
Managing Principal
Ken works with real estate executives to help them make appropriate strategic decisions regarding their residential communities, including for-sale and rental of all types. He has a particular specialty in large-scale master-planned communities.
John Burns photo
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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