Housing Market Potential Dips Slightly From 13-Year High, 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 March 2021.
March 2021 Potential Home Sales
- Potential existing-home sales decreased to a 6.26 million seasonally adjusted annualized rate (SAAR), a -0.1 percent month-over-month decrease.
- This represents a 79.7 percent increase from the market potential low point reached in February 1993.
- The market potential for existing-home sales increased 23.6 percent compared with a year ago, a gain of 1,197,267 (SAAR) sales. Year-over-year comparisons will be very large in the months to come, as the housing market came to a halt last year at this time when the pandemic shut down the economy. Housing rebounded sharply in the summer.
- Currently, potential existing-home sales is 527,022 million (SAAR), or 7.8 percent below the pre-recession peak of market potential, which occurred in April 2006.
Market Performance Gap
- The market for existing-home sales outperformed its potential by 5.6 percent or an estimated 348,600 (SAAR) sales.
- The market performance gap increased by an estimated 146,600 (SAAR) sales between February 2021 and March 2021.
Chief Economist Analysis: Millennials, Still Low Rates Fueling Demand
“After hitting its highest point since 2007 last month, housing market potential fell modestly in March, according to our Potential Home Sales Model. Housing market potential remains near the 13-year high point, but the severely limited supply of homes for sale and an uptick in mortgage rates pulled market potential for existing-home sales off its February peak,” said Mark Fleming, chief economist at First American. “Annual comparisons of housing market potential will be very large for the next few months, as the housing market came to a halt last year at this time when the pandemic shut down the economy. However, housing market potential is 16.5 percent higher than two years ago and will remain strong due to a demographic-fueled shift away from renting to home owning driven by millennials aging into homeownership and accelerated by still low mortgage rates.”