Continuous demand from first-time home buyers adds pressure to affordability
The existing-home market continued to underperform its potential in October as potential sales increased month over month, according to the Potential Home Sales model released by First American Financial.
Potential sales of existing homes grew to a seasonally adjusted, annualized rate of 5.89 million or an increase of 0.4% from September. On a year-over-year basis, market potential for sales slipped 4.3%, or a decrease of 262,000 sales. The October rate is a 95.7% increase compared to the lowest market potential level recorded in December 2008.
During the month, the market for existing-home sales underperformed potential by 7.7%, which represents sales at a seasonally adjusted, annualized rate of 455,000. The underperformance comes as market potential increased by approximately 26,000 sales in October on a month-over-month basis.
First American Chief Economist Mark Fleming attributed the underperformance to tight supply that remains a challenge to affordability.
“Tight supply and strong first-time home buyer demand continue to be the dominant factors driving the current state of the housing market. Existing homeowners remain reluctant to list their homes for sale for fear of not being able to find a home to buy, keeping supply levels low. At the same time, a healthy number of potential home buyers continue to enter the market, so house prices are increasing and affordability is declining,” Fleming said. “Historically low rates offer some relief in the form of strong borrowing power, however rates are expected to rise in the months to come, so if you are renting and thinking of buying, now is the time.”
Related stories:
Why aren’t homeowners selling?
First American: Existing-home sales market continues to underperform potential
Potential sales of existing homes grew to a seasonally adjusted, annualized rate of 5.89 million or an increase of 0.4% from September. On a year-over-year basis, market potential for sales slipped 4.3%, or a decrease of 262,000 sales. The October rate is a 95.7% increase compared to the lowest market potential level recorded in December 2008.
During the month, the market for existing-home sales underperformed potential by 7.7%, which represents sales at a seasonally adjusted, annualized rate of 455,000. The underperformance comes as market potential increased by approximately 26,000 sales in October on a month-over-month basis.
First American Chief Economist Mark Fleming attributed the underperformance to tight supply that remains a challenge to affordability.
“Tight supply and strong first-time home buyer demand continue to be the dominant factors driving the current state of the housing market. Existing homeowners remain reluctant to list their homes for sale for fear of not being able to find a home to buy, keeping supply levels low. At the same time, a healthy number of potential home buyers continue to enter the market, so house prices are increasing and affordability is declining,” Fleming said. “Historically low rates offer some relief in the form of strong borrowing power, however rates are expected to rise in the months to come, so if you are renting and thinking of buying, now is the time.”
Related stories:
Why aren’t homeowners selling?
First American: Existing-home sales market continues to underperform potential
