Rising mortgage rates are not expected to slow down the spring homebuying season, according to First American’s Potential Home Sales Model.
“All factors considered, the market potential for existing-home sales remains well positioned to continue to rise,” First American Chief Economist Mark Fleming said in a release. “The economy will likely continue to improve with vaccine rollouts accelerating. … Even if mortgage rates continue to rise, increasing household formation, in conjunction with more favorable market conditions, will keep home-buying demand high.”
Potential existing-home sales in February increased 1.3 percent month-over-month, according to the report. That’s a 12.2 percent year-over-year and a 79.6 percent increase from the market potential low point reached in February 1993.
“While rising average tenure length was the largest drag on housing market potential this month, the lift from still rising house-buying power, looser credit standards, and strong household formation outpaced the negative impact from limited supply, both new and existing,” Fleming said. “As we enter the spring-homebuying season, these dynamics are poised to support continued strength in the housing market.
“In addition, the recent increase in housing starts means homebuilders are pushing through on new construction projects, which will work to alleviate some of the supply shortage in the longer run. Expect continued strong demand and short supply, which means the spring homebuying season will be moving with a sales velocity that has not been seen before.”