Market Potential Improves on the Back of Gains in Income, According to First American Chief Economist’s Potential Home Sales Model
—Recent improvements in employment and income levels are beneficial to housing demand, but increasing the pressure for an
In August, the market potential for existing-home sales grew by 1.08 percent compared to July, an increase of 62,000 (SAAR) sales, and increased by 5.9 percent compared to a year ago. This month, potential existing-home sales increased to 5.78 million (SAAR). This represents a 91.9 percent increase from the market potential low point reached in
Chief Economist Analysis: Market Potential Improves on Income Growth
According to the
“The West, which has recently been a laggard in sales when compared to other parts of the country, saw a 2.5 percent increase from June to July and was the only region to experience an increase in existing-home sales. The Northeast fell by 13.2 percent on a month-over-month basis, while the Midwest and South saw sales drop by 5.2 percent and 2.5 percent, respectively,” said
“Despite tight inventories and rising prices, consumers continue to be optimistic about the housing market. Nowhere is this more evident than in new-home sales volume, which according to the
“Historic low mortgage rates have been extremely influential in boosting the housing market, softening the impact of rising prices and offering consumers increased leverage and buoyed home-buying power. However, recent improvements in employment data and income gains are starting to play a larger role influencing home-buying power, providing a firm foundation for increased housing demand,” said Fleming. “According to the
“Further confirming signs of a stronger consumer, the
“These recent gains in consumer financial health not only impact housing demand, but also play a role in the Federal Open Market Committee’s (FOMC) rate policy. With the September meeting just around the corner, some are now questioning if these positive economic indicators are enough for the Fed to raise rates,” said Fleming. “While the labor markets are improving and wages are rising, have the gains been strong enough to convince the
Fleming added, “Rising rates will have a modest impact on housing demand, but they also signal a strengthening labor market and increased inflation pressure due to rising incomes – both unequivocally good for housing market health.”
*Previous Potential Home Sales releases referred to
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