Housing Market Potential Reaches Highest Level Since 2007, According to First American Potential Home Sales Model

First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released First American’s proprietary Potential Home Sales Model for the month of August 2020.

August 2020 Potential Home Sales

• Potential existing-home sales increased to a 5.92 million seasonally adjusted annualized rate (SAAR), a 5.6 percent month-over-month increase.
• This represents a 70.8 percent increase from the market potential low point reached in February 1993.
• The market potential for existing-home sales increased 9.7 percent compared with a year ago, a gain of nearly 525,580 (SAAR) sales.
• Currently, potential existing-home sales is 875,000 million (SAAR), or 12.9 percent below the pre-recession peak of market potential, which occurred in April 2006.

Market Performance Gap

• The market for existing-home sales underperformed its potential by 4.8 percent or an estimated 282,430 (SAAR) sales.
• The market performance gap increased by an estimated 271,060 (SAAR) sales between July 2020 and August 2020.

Chief Economist Analysis: Strong Fundamentals Propel Housing Market Potential

“Since hitting a low point during the initial stages of the pandemic, the only major industry to display immunity to the economic impacts of the coronavirus is the housing market. Housing has experienced a strong V-shaped recovery and is now exceeding pre-pandemic levels,” said Mark Fleming, chief economist at First American. “This is largely because the economic distress from the pandemic has created a services-driven recession, disproportionally hurting younger, lower wage renters that are less likely to be homeowners or home buyers.

“The bifurcated economic landscape has allowed prospective home buyers who are still employed to channel increased savings towards buying a home, and to take advantage of record low mortgage rates. Weekly purchase applications have surpassed their levels from one year ago for 17 straight weeks, due to a delayed spring season and the heightened demand from low rates,” said Fleming. “In August, these tailwinds propelled housing market potential to its highest level since 2007, driven by a 5.6 percent month-over-month jump in the market potential for existing-home sales, according to our Potential Home Sales Model.”