John Burns: Competition Mounting as Community Counts Up 6%

By John Burns, CEO

Strong housing markets attract competition.

Home builder competition in the 33 largest markets in the country has increased 6% over the last year to 8,336 new home communities. These communities represent about 40% of US new home sales.

The increases vary wildly by market, as shown in the chart below.

John Burns, Housing market, competition, Sacramento, East Bay, Bay Area

It won’t surprise you that community counts are down as much as 27% in some of the most supply-constrained markets like San Francisco, Seattle, and Boston. But it might surprise you that community counts are up strongly in some supply-constrained markets, too, such as 31% in Orange County (CA) and 22% in Fort Lauderdale. Rising supply in high-priced markets can change dynamics quickly. Here are three examples:

  1. Orange County, CA. Orange County’s housing market has clearly become more competitive in the $1 million +/- price range in the masterplans where much of the supply has been added. Consulting leader Adam Artunian reports that builders have been relying on an influx of foreign buyers to sell these expensive homes. Multiple times in the last year sales have surged and then slowed, and then surged again for reasons that have more to do with issues overseas than with Orange County’s local dynamics.
  2. Fort Lauderdale, FL. In Fort Lauderdale, consulting leader Lesley Deutch reports Cal Atlantic and Hovnanian recently entered Fort Lauderdale, and Pulte will open up next year. Most of the local builders were not planning for this increased level of competition.
  3. Northern California. In Northern California, consulting leader Dean Wehrli reports that increasing supply in both Sacramento and the East Bay have created pressure on builders to execute better. A few builders who pushed prices too far have had to retrench, and other builders who opened communities before they were buyer-ready have struggled as well. The builders with desirable floor plans that are priced right and executed well tend to outperform. The lesson here is to do your homework and don’t get sloppy.

Monitoring competitive supply can be just as important as monitoring overall market conditions. This is why we geocode communities in every MSA for 744 home builders. Those builders represent about 58% of US new home sales.

Our recommendations:

  • Estimate how much competition will be in the market while you are selling and make that part of your budgeting plans.
  • Pay attention to new builders coming to town. Publicly traded home builders can afford to subsidize a division to get them up and running to scale.
  • Do it right the first time. While it is tempting to start sales right away and to set aggressive deadlines for your construction crews, be more realistic with your home buyers. Set reasonable expectations and pleasantly surprise them when you exceed expectations. Otherwise, you will lose sales to your competitors.

If you have any questions about this release, are interested in seeing our local market research reports, or would like to speak with one of our consultants, please reply to this email. You can also directly contact one of our team members listed at

West Coast Commercial Real Estate News