SANTA ANA, Calif.--(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 February 2017.
February 2017 Potential Home Sales
- Potential existing-home sales decreased to a 5.7 million seasonally adjusted, annualized rate (SAAR).
- This represents an 89.8 percent increase from the market potential low point reached in December 2008.
- In February, the market potential for existing-home sales fell by 0.5 percent compared with a month ago, a decline of 28,000 (SAAR) sales.
- Currently, potential existing-home sales is 658,000 (SAAR) or 11.5 percent below the pre-recession peak of market potential, which occurred in July 2005.
Market Performance Gap
- The market for existing-home sales is underperforming its potential by 2.5 percent or an estimated 142,000 (SAAR) of sales.
- Last month’s revised underperformance gap was 4.5 percent or 260,000 (SAAR) sales.
Chief Economist Analysis: Millennial First-Time Homebuyer Demand Remains Strong Despite Sellers’ Market
“Steady income and job growth combined with increased building permit activity has increased the market potential for home sales on an annual basis,” said Mark Fleming, chief economist at First American. “Demand from Millennials and first-time homebuyers remains robust despite the strong spring sellers’ market and rising rates, resulting in a shrinking underperformance gap, as the market aligns with its potential.”
Additional Quotes from Chief Economist Mark Fleming
- “The housing market’s potential for existing-home sales grew 2.4 percent over the past 12 months, despite increasing interest rates. Strong building permit activity and an increasing number of people returning to the workforce helped to increase market potential.”
- “Limited supply, which remained steady at 3.6 months, continues to put upward pressure on prices, as current homeowners are caught in a ‘matching trap,’ where they are reluctant to list their homes for sale out of concern they will not find a home to buy.”
- “Nevertheless, the outlook for further increases in market potential remains bullish, as strong job and income growth, and increasing demand from Millennials and first-time home buyers in general, bode well for the housing market.”
- “Additionally, according to the most recent First American Real Estate Sentiment Index, there is increasing confidence among real estate professionals that buyer demand will remain strong, even if rates exceed 5 percent.”
What Insight Does the Potential Home Sales Model Reveal?
“When considering the right time to buy or sell a home, an important factor in the decision should be the market’s overall health, which is largely a function of supply and demand. Knowing how close the market is to a healthy level of activity can help consumers determine if it is a good time to buy or sell, and what might happen to the market in the future. That’s difficult to assess when looking at the number of homes sold at a particular point in time without understanding the health of the market at that time,” said Fleming. “Historical context is critically important. Our potential home sales model measures what we believe a healthy market level of home sales should be based on the economic, demographic, and housing market environments.”
The next Potential Home Sales model will be released on April 20, 2017 with March 2017 data.
About the Potential Home Sales Model
Background information on the First American Potential Home Sales model is available here.
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. © 2017 by First American. Information from this page may be used with proper attribution.
About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $5.6 billion in 2016, the company offers its products and services directly and through its agents throughout the United States and abroad. In both 2016 and 2017, First American was recognized by Fortune® magazine as one of the 100 best companies to work for in America. More information about the company can be found at www.firstam.com.