—Strong demographic demand will continue to act as the wind in the housing market’s sails, says Chief Economist Mark Fleming—
SANTA ANA, Calif., November 22, 2021–(BUSINESS WIRE)–First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released First American’s proprietary Potential Home Sales Model for the month of October 2021. The Potential Home Sales Model measures what the healthy market level of home sales should be based on economic, demographic, and housing market fundamentals.
October 2021 Potential Home Sales
For the month of October, First American updated its proprietary Potential Home Sales Model to show that:
Potential existing-home sales increased to a 6.27 million seasonally adjusted annualized rate (SAAR), a 0.1 percent month-over-month increase.
This represents a 79.8 percent increase from the market potential low point reached in February 1993.
The market potential for existing-home sales increased 10.3 percent compared with a year ago, a gain of nearly 584,000 (SAAR) sales.
Currently, potential existing-home sales is 522,000 million (SAAR), or 7.7 percent below the pre-recession peak of market potential, which occurred in April 2006.
Market Performance Gap
The market for existing-home sales outperformed its potential by 8.4 percent or an estimated 525,000 (SAAR) sales.
The market performance gap increased by an estimated 52,000 (SAAR) sales between September 2021 and October 2021.
Chief Economist Analysis: What 2021 Housing Market Dynamics Indicate for Next Year
“In September 2021, existing-home sales increased to a 6.29 million seasonally adjusted annualized rate (SAAR). Prior to the pandemic, the housing market had not reached this sales pace since 2006,” said Mark Fleming, chief economist at First American. “We may see another strong month in October, as housing market potential increased 10.3 percent compared with one year ago to 6.27 million (SAAR), according to our measure of the market potential for existing-home sales.
“As we approach the final weeks of the year, it’s important to reflect on how the housing market has performed,” said Fleming. “Analyzing the individual economic forces that have driven the continued growth of market potential for existing-home sales can provide insight into how the housing market may fare in 2022.”
Why Housing Market Potential Keeps Rising
Credit Standards Loosened: “When lending standards are tight, fewer people can qualify for a mortgage to buy a home, thus they are more likely to stay in their current home, limiting the supply of homes …….