The month of May saw an increase in potential existing home sales, according to First American’s latest Potential Home Sales Model.
The sales of potential existing homes in the US increased marginally to a 5.20 million seasonally adjusted annualized rate (SAAR), up 0.4% from April.
“The housing market outperformed its potential in May 2019,” First American Chief Economist Mark Fleming said. “Actual existing-home sales are 0.2% above the market’s current potential, according to our Potential Home Sales model.”
However, Fleming said that the market is underperforming even as mortgage rates dropped and household income rose. The market potential for existing-home sales declined by 1.5% from last year, representing 79,500 of sales lost.
“Yet, today, we are in an unprecedented homebody era as many existing homeowners continue to feel rate-locked into their homes and seniors continue to age in place,” he said. “Looking ahead, more than half of all existing homes are owned by baby boomers and the silent generation and they will eventually age out of homeownership. But right now, housing supply remains tight – you can’t buy what’s not sale – and market potential is lower because of it.”
Currently, potential existing-home sales fell 22.7% (1.53 million SAAR) below its pre-recession peak of market potential in March 2004.
“Since existing homeowners supply the majority of the homes for sale and increasing tenure length indicates homeowners are not selling, the housing market faces an ongoing supply shortage – you can’t buy what’s not for sale,” said Fleming.