Potential existing-home sales in August increased to a 5.18 million seasonally adjusted annualized rate (SAAR), a 0.2 percent month-over-month increase, according to First American’s proprietary Potential Home Sales Model.
First American said August’s increase represents a 54.2 percent increase from the market potential low point reached in February 1993. It said the market potential for existing-home sales declined in August by 1.9 percent compared with a year ago, a loss of 102,760 (SAAR) sales.
“While down compared with a year ago, existing-home sales have slightly outperformed market potential since February 2019, begging the question – how can existing-home sales exceed market potential?” First American Chief Economist Mark Fleming asked in a release.
First American said potential existing-home sales is 1.55 million (SAAR), or 23.1 percent below the pre-recession peak of market potential, which occurred in March 2004. It said the market performance gap increased by an estimated 23,000 (SAAR) sales between July 2019 and August 2019.
“While actual existing-home sales have outperformed market potential for the last six months, the performance gap has been very small,” Fleming said. “When the actual level of existing-home sales is significantly above the market potential for home sales, the likelihood of a market correction increases.
“Today, the performance gap is not at the level that implies a possible market correction,” Fleming added. “In fact, there are signs that the market potential for existing-homes may begin to rise.”