First American Financial Corporation, a global provider of title insurance, settlement services, and risk solutions for real estate transactions, released its May 2017 Potential Sales report Tuesday. First American reported potential existing-home sales increased to a 5.72 million seasonally adjusted, annualized rate (SAAR) and a 1.8 percent month-over-month increase. Since the market low in December 2008, this is a 90.3 percent increase.
Market potential for existing-home sales fell by 1.1 percent compared to 2016, which is a decline of 62,000 (SAAR) sales. As of May, potential existing-home sales are 644,000 (SAAR), OR 11.2 percent under the July 2005 pre-recession peak of market potential.
“As more and more millennials marry and have children, among the strongest determinants for the desire to be a homeowner, demand for housing will remain robust,” said Mark Fleming, chief economist at First American. “However, the housing market faces a dilemma that is restricting the inventory of homes for sale. As rates rise and the cost to finance a mortgage increases, existing homeowners are prisoners in their own homes. In addition, the fear of being unable to find a home to purchase hinders homeowners’ decision to sell.”
Existing-home sales is underperforming its potential by 3.8 percent or an estimated 218,000 (SAAR) sales. Between April 2017 and May 2017, market potential grew by 1.8 percent month over month, which is an increase of 98,000 (SAAR) sales.
“When considering the right time to buy or sell a home, an important factor in the decision should be the market’s overall health, which is largely a function of supply and demand,” Fleming said. “Knowing how close the market is to a healthy level of activity can help consumers determine if it is a good time to buy or sell, and what might happen to the market in the future. That’s difficult to assess when looking at the number of homes sold at a particular point in time without understanding the health of the market at that time. Historical context is critically important. Our potential home sales model measures what we believe a healthy market level of home sales should be based on the economic, demographic, and housing market environments.”