First American Financial Corporation recently released its May Potential Home Sales Model and the findings reveal an increase in potential existing-home sales, rising to 4.92 million seasonally adjusted annualized rate (SAAR).
This represents a 6.2% month-over-month rise, as well as a 46.5% rise from the lowest market potential level experienced during February 1993.
When compared to a year ago, May’s market potential dipped 7%, having lost an estimated 368,120 SAAR sales. Currently, potential existing-home sales are hovering at 1.81 million SAAR, which is 26.9% less than the peak reached before the recession in March 2004.
When compared from just last month, the existing homes market surpassed its potential by more than 11%, which equates to roughly 565,580 SAAR sales. The result also revealed that ever since April, the market performance gap has been lessened thanks to more than 300,000 SAAR sales.
Mark Fleming, Chief Economist at First American, provided a synopsis of the shift between April and May, as well as pointed hopes of a recovery ahead: "The early signs of a housing market comeback that appeared in mid-April, rising weekly purchase loan applications, continued to surge through May and into June. In fact, weekly purchase loan applications have now exceeded pre-pandemic levels.”
Fleming added: “While the coronavirus pandemic continued to negatively impact the domestic and global economy in May, the market potential for existing-home sales rebounded from the April low point, according to our Potential Home Sales Model.”
As to the main reasonings behind this steady surge in sales, Fleming stated: "The two biggest drivers of the increase in May are slightly loosening credit standards, which allow more potential home buyers to qualify for financing, and the increase in house-buying power due to historically low mortgage rates.”