Expert: Market Demand Is ‘Strong, Stable, But Shifting Locations’

"Purchasers are using every penny they have saved. Developers are struggling to make projects work. And this data nerd expects we won’t see much relief ‘til sometime mid next year."In preparing for this month's article, I did my usual research, reading up on what the economists and the data sellers in the new home business are saying, and digging into our own stats from the thousands of new home transactions that run through our system.

Let me be clear, average home prices on a national and averaged basis can be — and have been — very dangerous numbers that the media has used to cry “prices are falling”; which is emphatically not true, as many have stated and we have confirmed. In addition, these numbers don’t really relate to what the price of your home is, and it would be irresponsible for anyone to suggest that prices are down 18% — because they are not.

But if demand is shifting towards lower prices, then why aren’t prices falling as well? Two answers. First, demand is substantial, so the continuum is full and broad, and second, supply is majorly constrained across the board. So even though there are fewer buyers for the higher price points, there are still buyers, and supply has been constrained to meet demand so there is no surplus in the segment; prices stay flat.

In summary, peak demand and sales volumes will continue to target, roughly, the same monthly payment, and with confidence. This will move the average price point up and down with rates, but keep sales flowing. Actual home prices will only fall if supply starts to exceed demand for any given price point, but only to a maximum of the difference in affordability caused by interest rates. And so far, supply remains constrained across the continuum, so it’s likely prices remain flat for most markets.

I’m sorry I don’t have better news to report, but it would seem we are in a stalemate between supply and demand for housing — of any and all kinds. Prices for all housing types are only going up, and it’s not going to get any easier for developers to bring much-needed supply to market. Purchasers are using every penny they have saved to stay housed, waiting for some relief in the form of lower rates and/or more supply, which are still a ways away.

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