SANTA ANA, California
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July 22, 2022
(press release)
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As the housing market adjusts to a post-pandemic norm with higher mortgage rates, housing market potential will subside from recent highs, but those highs were the exception and not the norm, says Chief Economist Mark Fleming First American Financial Corporation (NYSE: FAF), a premier provider of title, settlement and risk solutions for real estate transactions and the leader in the digital transformation of its industry, today released First American’s proprietary Potential Home Sales Model for the month of June 2022. The Potential Home Sales Model measures what the healthy market level of home sales should be based on economic, demographic, and housing market fundamentals. June 2022 Potential Home Sales Chief Economist Analysis: Housing Market Potential Declined 2.5 percent month over month “While housing market potential remains strong from a historical perspective, it is down from pandemic highs. To understand why, one must look at how the fundamentals that drive the potential for existing-home sales have changed since June of last year,” said Fleming. “We can also examine what those changes mean for housing market potential in the near future. “Compared with June 2021, the market potential for existing-home sales has decreased by approximately 823,000 sales,” said Fleming. “Based on a dynamic simulation using our Potential Home Sales Model, we can identify the fundamentals influencing potential existing-home sales today relative to a year ago and segment them by the fundamentals that are reducing or boosting housing market potential.” Fundamentals Reducing Housing Market Potential Fundamentals Boosting Housing Market Potential How Has the Housing Market Fared? Next Release About the Potential Home Sales Model Disclaimer About First American
“The market potential for existing-home sales in June was estimated to be 5.47 million at a seasonally adjusted annualized rate (SAAR), down 2.5 percent compared to last month, and 13.1 percent lower than one year ago, which is near the same level as in early 2019,” said Mark Fleming, chief economist at First American.
“Relative to last year, the reduction in demand stemming from falling house-buying power, tighter credit, and homeowners staying put resulted in a significant decline in the market potential for existing-home sales. Yet, despite these headwinds, market potential is currently near early 2019 levels,” said Fleming. “Households are continually forming and increasing demand for shelter, existing homeowners have record levels of home equity, and the fear of not being able to find something to buy is easing. As the housing market adjusts to a post-pandemic norm with higher mortgage rates, housing market potential will subside from recent highs, but those highs were the exception and not the norm.”
The next Potential Home Sales Model will be released on August 17, 2022 with July 2022 data.
Potential home sales measures existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, homeowner tenure, house-buying power in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market. When the actual level of existing-home sales are significantly above potential home sales, the pace of turnover is not supported by market fundamentals and there is an increased likelihood of a market correction. Conversely, seasonally adjusted, annualized rates of actual existing-home sales below the level of potential existing-home sales indicate market turnover is underperforming the rate fundamentally supported by the current conditions. Actual seasonally adjusted annualized existing-home sales may exceed or fall short of the potential rate of sales for a variety of reasons, including non-traditional market conditions, policy constraints and market participant behavior. Recent potential home sale estimates are subject to revision to reflect the most up-to-date information available on the economy, housing market and financial conditions. The Potential Home Sales model is published prior to the National Association of Realtors’ Existing-Home Sales report each month.
Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2022 by First American. Information from this page may be used with proper attribution.
First American Financial Corporation (NYSE: FAF) is a premier provider of title, settlement and risk solutions for real estate transactions. With its combination of financial strength and stability built over more than 130 years, innovative proprietary technologies, and unmatched data assets, the company is leading the digital transformation of its industry. First American also provides data products to the title industry and other third parties; valuation products and services; mortgage subservicing; home warranty products; banking, trust and wealth management services; and other related products and services. With total revenue of $9.2 billion in 2021, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2022, First American was named one of the 100 Best Companies to Work For by Great Place to Work® and Fortune Magazine for the seventh consecutive year. More information about the company can be found at www.firstam.com.
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