What to pay attention to, supply or demand?

We took a drive this Saturday afternoon around some new home communities in North County San Diego, just to see what's happening. The first take away was there is something happening, in the way of new construction, which is great. One community had what appeared to be 8-10 specs under construction by two separate national builders. And this same community had a full selection of model homes to shop.

The supply seemed to be solid here. But it didn't jive with the demand at least our research, nationwide, and that of other trusted researchers have been identifying for years.

In all our travels we saw NO single-story models or specs. We saw one banner sign at Old Creek Ranch saying, "ask us about our NEW single story". But it was nowhere to be seen. We did see a few (literally less than five) completed single story homes but the elevations and architecture were seriously underwhelming. If that's my single story option, I wouldn't buy it either. Yet all the research we do, in markets from coast-to-coast shows buyers of all family types and life stages saying they would clearly prefer single story homes. The only buyer group where this is not the case in an overwhelming way is the mature family (those with teens they likely want some space from).

So here's the question... if builders keep building the same two story homes, that's all there is to buy. And the buying of them doesn't mean that's what the buyers want. It just means that's all we are offering them. I get it that some of these communities are land plans that are just emerging from the horrific housing recession with lot sizes dug into the bedrock, and not large enough to support innovative single story living.

Maybe we just need to get this inventory moved on through the pipeline and exhaust this supply, before we see a response to true buyer demand and take the product innovation risk to create a new, innovative product buyers say they want. For now, I am taking with a huge grain of salt any stats that tell me most buyers are still buying two story homes, 2,500 - 3,900sf ... because that's all I can see we are offering them right now.