Home >> Daily Dose >> Potential Home Sales Drop, but Demand Still Strong
Print This Post Print This Post

Potential Home Sales Drop, but Demand Still Strong

Potential home sales fell by 0.2 percent to 5.69 million in April, according to Tuesday’s Potential Home Sales model from First American. This represents an 89.3 percent increase from the market potential low point reached in December 2008.

In addition, potential existing-home sales fell by 0.1 percent compared with a year ago, a decline of 5,000 seasonally adjusted, annualized rate (SAAR) sales. Potential Existing home sales are currently 11.8 percent below the July 2005 pre-recession peak of market potential, at a SAAR of 674,000.

“Demand for existing-homes remains strong, as positive economic conditions and the demographic tail wind of Millennial demand continues to grow. Meanwhile, sellers are increasingly unwilling to list their homes for sale. The market faces a ‘prisoner’s dilemma.’ If everyone sells, there will be plenty of supply, but the risk of selling when others don’t, the inability to find a home to purchase at the right price, is preventing homeowners from putting their homes on the market,” said Mark Fleming, Chief Economist at First American. “The ‘prisoner’s dilemma’ in housing is restricting supply, causing increased house price appreciation and falling affordability.”

What the study found is that strong consumer demand fueled gains in market potential for existing home sales, but this was offset by high prices and falling affordability. Additionally, falling unemployment and healthy wage growth contributed to strong demand. Still, conflicting forces kept market existing home demand relatively unchanged month-over-month in April.

Even as affordability falls, actual existing-home sales surged to the highest rate seen since 2007 in April, at 5.71 million sales, according to the National Association of Realtors. Home sales stayed on the market for shorter times, too, at an average of 73 days, five days faster than a year ago. As the seller’s market continues to strengthen, affordability is expected to decline further. Yet, First American notes that it’s “unclear if the declining affordability will begin to curtail demand.”

About Author: Seth Welborn

x

Check Also

Survey: Homeownership Remains Elusive for Baby Boomer Renters

A recent look into housing affordability by NeighborWorks America has found that three in five long-term baby boomer renters feel homeownership remains unattainable.