Consumer buying power is rising but will that boost sales?

American homebuyers are gaining power with wages rising faster than the average increase since the financial crisis.

That, together with lower mortgage rates, should mean increased housing demand and greater sales volumes according to the First American Potential Home Sales Model.

“Two trends are driving an early spring bounce in consumer house-buying power: rising income and lower mortgage rates. In March, average hourly earnings grew at an annual rate of 3.2%, well above the 2.3% average annual pace seen over the past 10 years, said First American’s chief economist Mark Fleming.

Potential existing-home sales increased marginally to a 5.24 million seasonally adjusted annualized rate (SAAR), a 1.5 percent month-over-month increase.

The market potential for existing-home sales declined by 0.3% compared with a year ago, a loss of 13,000 (SAAR) sales.

Supply shortages
The market for existing-home sales is underperforming its potential by 2.3% or an estimated 121,000 (SAAR) sales.

The market performance gap decreased by an estimated 10,000 (SAAR) sales between February 2019 and March 2019.

“Ongoing supply shortages remain the main driver of the performance gap as the housing market continues to face an inventory impasse – you can’t buy what’s not for sale,” said Fleming. “However, an unexpected affordability surge, driven primarily by lower-than-anticipated mortgage rates, rising wages and favorable demographics, has boosted housing

demand. The result? The start of a surprisingly strong spring home-buying season.”