Unexpected Bump in House-Buying Power Lifts Market Potential, According to First American Potential Home Sales Model - Seite 2

There Are Still Forces Pushing Back

• Tightening Credit: “A downside of increased economic uncertainty that directly impacts housing is the potential for tightening credit conditions. When lending standards are tighter, fewer people can qualify for a mortgage, dampening first-time home buyer demand and increasing the likelihood that some homeowners stay in their current homes because they are ineligible for a new mortgage,” said Fleming. “In August, while credit conditions remained looser than average, they did tighten relative to July. Tighter credit conditions reduced potential home sales by approximately 54,000 compared with one month ago.”

• Lack of Supply: “The average length of time someone lives in their home increased in August relative to July, trimming housing market potential by over 7,000 potential home sales,” said Fleming. “While low mortgage rates can spur home-buying demand by reducing the monthly cost of a mortgage and increasing house-buying power, many existing owners who have refinanced into even lower mortgages are less incentivized to move. Approximately two-thirds of all home buyers are existing homeowners, so fewer homeowners listing their homes reduces housing supply.”

It’s Complicated

“The housing market’s relationship with this pandemic economy is complicated. While heightened economic uncertainty dims consumer confidence and may result in tighter credit, it also puts downward pressure on mortgage rates,” said Fleming. “The shortage of labor supply relative to the growing demand for labor has fueled household income growth. While the economy may be taking a ‘Delta dip,’ the unexpected burst of increased house-buying power has boosted housing market potential.”

Next Release

The next Potential Home Sales Model will be released on October 17, 2021 with September 2021 data.

About the Potential Home Sales Model

Potential home sales measures existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, homeowner tenure, house-buying power in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market. When the actual level of existing-home sales are significantly above potential home sales, the pace of turnover is not supported by market fundamentals and there is an increased likelihood of a market correction. Conversely, seasonally adjusted, annualized rates of actual existing-home sales below the level of potential existing-home sales indicate market turnover is underperforming the rate fundamentally supported by the current conditions. Actual seasonally adjusted annualized existing-home sales may exceed or fall short of the potential rate of sales for a variety of reasons, including non-traditional market conditions, policy constraints and market participant behavior. Recent potential home sale estimates are subject to revision to reflect the most up-to-date information available on the economy, housing market and financial conditions. The Potential Home Sales model is published prior to the National Association of Realtors’ Existing-Home Sales report each month.