First American said it is unlikely that home buyers will be dissuaded by a modest increase in mortgage rates
The existing-home market continued to underperform its potential in January, but the gap between actual market performance and potential home sales has narrowed significantly, according to First American Financial’s Potential Home Sales Model.
The market potential for existing-home sales was at a seasonally adjusted annualized rate of 6.1 million during the month, an increase of 0.4% month over month. Year over year, January gained 210,000 sales over the year-ago period.
First American Chief Economist Mark Fleming said the increase in market potential reflects faster economic growth, low unemployment, and continued low mortgage rates. With expectations among economists that the 30-year fixed-rate mortgage will approach 5% by the end of 2019, Fleming said it is unlikely that large numbers of home buyers will be dissuaded by such a modest increase in mortgage rates.
“There are a variety of reasons why people buy homes that are completely independent of mortgage rates. A gradual rise in mortgage rates won’t change that,” Fleming said.
“Our Potential Home Sales model forecasts what the market potential for home sales should be given current economic, demographic, and housing market environments. Potential home sales, while currently at a level of 6.1 million SAAR, are expected to reach an estimated 6.29 million SAAR by the end of 2019, despite a rising rate environment,” he said. “However, while the yearly growth rate in potential sales is currently at 3.6%, it is expected to slow to just below 1% by the end of 2019.Related stories:
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