Potential home sales increase, but applications still down from pre-pandemic levels.

The Potential Home Sales Model published by First American Financial Corporation covering February 2023 has found that potential existing-home sales increased to a seasonally adjusted annualized rate of 5.74 million units, a 2.6% month-over-month increase. Further, this number represents a 56.7% increase from the market potential low point which occurred in February 1993. However, the market potential for existing-home sales decreased 11.4% year-over-year—a loss of 702,000 units. As of February, the current potential existing-home stands at a rate of 1,325,700 seasonally adjusted units, or a drop of 19.5% below the pre-recession peak of market potential which occurred in April 2006. “The spring season is typically the busiest time of the year for the housing market. According to data from First America Data & Analytics, historically approximately 36% of existing-home sales for the year occur from March through June. The housing market’s seasonal pattern is driven by factors such as weather, holidays and the traditional school year schedule, all of which make spring and summer a more optimal time for moving for many potential home buyers,” said Mark Fleming, Chief Economist at First American. “Yet, there are early signs that the spring home-buying season is off to a slow start. Comparing average mortgage applications in February of this year to February 2019 — the last ‘normal’ year before the pandemic hit — reveals that purchase applications are down more than 30%. Whether the housing market remains frozen or begins to thaw during the crucial spring months is a function of many factors, ranging from mortgage rates to inventory,” Fleming continued — “Our Potential Home Sales Model, which measures what we believe a healthy market for home sales should be based on the economic, demographic and housing market environments, has now increased for four consecutive months alongside generally lower mortgage rates, providing some optimism. However, even if mortgage rates stabilize and demand drifts higher, you can’t buy what’s not for sale.” 

Source: MReport