I'm working on a case study, the aim is to predict the house prices over the next 10 years in US using MECE framework.

consulting McKinsey MECE MECE Principle
New answer on May 02, 2021
3 Answers
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Anonymous A asked on May 01, 2021

Since I have just started reading about MECE. It would be great if I could get some help.

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Hi there,

Is this a market sizing or a case? The reason is I ask, is this feels very much like a market sizing (where you'd use a top-down approach). That said, regardless, I'd generally think about this problem in the same way as Henning has i.e.:

Supply

What is the rate of new home construction? How much is this expected to change?

Demand

How much is demand increasing, at what rate, and how do we expect that to change?

A few key aspects to look at include:

  • US Population + new home purchasing (increasing somewhat)
  • US Population + Investment in housing (increasing substantially)
  • Foreign population + investment in housing (increasing substaintially)
  • Historical price rises (generally around 3-5% per annum)
  • Current and project Federal Reserve interest rate (0% now but likely 1-2% in a few years)
  • Building materials costs (rising dramatically)

(edited)

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Certainly multiple different approaches, my first one would be:

  • Supply
    • How many houses existing, how many newly built per year (net), split by reasonable geographic units (coastal cities, in-land cities, in-land rural)
  • Demand
    • Development of population, development of household sizes, demographic shifts from rural to cities

With that you could project development of supply and demand per region and project price developments.

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Hi, I agree in dividing in two main blocks your frame: demand and capacity

Best,
Antonello

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Ian gave the best answer

Ian

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