When thinking about the overall health of the housing market, it’s important to consider not only its current position, but also where it potentially could be, so as to perhaps predict where it might go in the future. Which is exactly the goal of First American’s Potential Homes Sales report for May 2017.
According to the report, potential existing-home sales increased to 5.72 million on a seasonally adjusted, annualized rate (SAAR), which is a 1.8 percent increase from the month prior. This number also is indicative of a 90.3 percent increase from a potential low point in the market that was reached back in December of 2008.
Conversely, during the month of May, potential for existing-home sales fell year-over-year by 1.1 percent, or 62,000 sales (SAAR). All-in-all, potential existing-home sales on a SAAR level sits at 644,000, which is 11.2 percent below July 2005’s pre-recession peak.
So, how did the market actually perform? First American reports that it is underperforming by an estimated 218,000 SAAR sales, or 3.8 percent. However, market potential grew about 98,000 sales from April to May.
Mark Fleming, Chief Economist at First American, weighs in on why this is:
“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,” Fleming said. “However, the housing market faces a dilemma that is restricting the inventory of homes for sale. In addition, the fear of being unable to find a home to purchase hinders homeowners’ decision to sell. The low inventory of homes for sale is preventing the housing market from reaching its potential and pressuring prices higher. Increasing shortages of homes for sale is a growing problem for potential home buyers, especially potential first-time home buyers today, as it causes affordability to decline.”