|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
Housing Guru John Burns - Supply and Demand in the Balance
Posted by: Canadian Value (IP Logged)
Date: February 27, 2014 11:14AM
We look at the housing demand/supply balance two ways:
Weighing Supply and Demand
When a homeowner sells their home and buys another home in the same market, they don't impact supply, since they add 1 and subtract 1 from the market. Detailed analysis may show that they are adding and subtracting supply from different price points and types of homes, but we won't get that detailed in this analysis. What matters to the overall market are the many groups who are:
We identified six primary buyers-only categories and eight sellers-only categories.
Categories 1 through 6 relate to each other, while categories 7 and 8 (banks and builders) are the big outliers that can cause supply to significantly outweigh demand. Since price appreciation historically exceeds inflation, the 6 buyer categories usually total more than the 8 seller categories. The categories that are currently lower than usual are red, and the categories that are currently higher than usual are blue.
Let's look at the imbalances of each category:
How It Worked Recently
In 2011 through early 2013, prices rose because of:
This imbalance tipped the scales back toward more buyers than sellers, and homes began appreciating again. Months of supply (MOS) plunged from 12 to 4.5. When MOS crossed 7 in late 2011, prices shifted from falling to rising.
Last year, rising prices, rising mortgage rates, and reduced confidence all contributed to a reversal in the direction of months of supply, slowing the rate of price appreciation.
To project price appreciation, we weigh all the factors described above to form a conclusion. We try to be scientific with our economic growth, housing supply, affordability, and bank sales estimates, but we also have to make qualitative assessments on factors such as investor activity and mortgage rates.
Right now, we believe more buyers than sellers will result in another year of price appreciation in most markets. However, we see huge differences by market. We are carefully monitoring supply in Texas and affordability in California and projecting very different years in each market and submarket.
Stocks Discussed: SPY, DJI, QQQ,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.