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First American Financial Corporation revealed that potential existing-home sales in September where essentially flat, as the seasonally adjusted annualized rate (SAAR)—0.02% month-over-month decline.
The market for potential existing-home sales rose 3.8% year-over-year, but the current SAAR is 18.6% below the pre-recession peak of market potential set in March 2004.
Additionally, the market for existing-home sales is underperforming its potential by 0.04%, or an estimated 2,340 (SAAR) sales.
First American’s Chief Economist Mark Fleming said the average rate of the 30-year fixed-rate mortgage was 4.63% and reached a high of 4.87% in November.
“In September of last year, rates were forecasted to continue to rise, as many experts believed the Federal Reserve would continue to increase the Federal Funds rate and put more upward pressure on mortgage rates. Rising rates reduce home-buying power and decrease market potential for existing-home sales,” Fleming said.
However, mortgage rates over the past 10 months have been on a steady decline for the past 10 months. Freddie Mac’s latest Primary Mortgage Market Survey revealed that they average 30-year fixed-rate mortgage was 3.69% for the week of
Freddie Mac’s latest Primary Mortgage Market Survey revealed that the average 30-year fixed-rate mortgage rose slightly to 3.69% for the week of October 17.
“Lower mortgage rates have a dual effect on the housing market: they incentivize homeowners to move as the rate ‘lock-in’ effect fades, which slows or reduces the average tenure of homeowners, and they boost demand by making homes more affordable,” Fleming said.
Another issue impacting the market’s potential is tenure, as First AM found that increasing tenure length has cost the market 137,230 potential home sales.
Overall, First AM says housing is “the most durable consumer good we’ll ever buy,” and rising home-buying power fuels increases demand.
“You can’t buy what’s not for sale, but rising existing-home sales means more homes on the market, helping to meet the growing demand,” said Fleming. “While several factors may trigger a directional switch for market potential, the current environment of low mortgage rates and wage growth driven by a strong labor market, supports a healthy housing market for the remainder of 2019.”
