Potential existing-home sales during August increased to a 6.13 million seasonally adjusted annualized rate (SAAR), a 0.8 percent month-over-month increase, according to the latest First American Potential Home Sales Model.
August’s SAAR is a 67.4 percent increase from the market potential low point reached in February 2011. First American said the market potential for existing-home sales in August increased by 2.9 percent compared with a year ago, a gain of 171,400 SAAR sales.
“Actual existing-home sales are 6.5 percent below the market’s potential, according to our Potential Home Sales model. That means the market has the potential to support more than 400,000 more home sales at a seasonally adjusted annualized rate (SAAR),” First American Chief Economist Mark Fleming said in a release.
“Severe supply shortages have been the primary culprit for this performance gap – you can’t buy what’s not for sale,” Fleming added. “The supply shortage, combined with first-time homebuyer demand, has created a strong seller’s market, where many potential buyers are bidding on the same few homes, which accelerates price appreciation.”
Fleming said increasing mortgage rates also have eroded consumer house-buying power, which is down 5 percent in June compared with a year ago.
“Despite expectations that higher rates will lead to a decline in home sales, our Potential Home Sales Model forecasts that the market potential for home sales, while currently at a level of 6.1 million SAAR, will reach an estimated 6.29 million SAAR in 2019, even if rates reach 5 percent,” Fleming said. “The reason? The strength of the economy and demographically driven demand.”