Is the housing market in a good state or is it seriously missing its potential? Well, it depends on which data report you consult.
For those who prefer positive news, the Mortgage Bankers Association (MBA) Builder Application Survey reported mortgage applications for new home purchases increased by 17 percent from February to March. New single-family home sales were running at a seasonally adjusted annual rate of 574,000 units in March, up 5.5 percent from the February pace of 544,000 units. On an unadjusted basis, the MBA estimated that there were 54,000 new home sales in March, up 14.9 percent from 47,000 new home sales in February. More than two-thirds o loan applications were made using conventional mortgages.
“Rising prices for existing homes and a strong job market are making the math work for new construction,” said Lynn Fisher, MBA’s vice president of research and economics. “In March, the Builder Application Index reached its highest level since its inception in 2012 and was more than 18 percent higher than one year ago. During the last three years, peak application activity for new homes has taken place in March and April suggesting the trend should continue next month.”
However, for those who tend to focus on gloomier news, the new Potential Home Sales model from First American Financial Corp. showed that the market for existing-home sales in March underperformed its potential by 11.5 percent or an estimated 664,000 seasonally adjusted, annualized rate (SAAR) of sales. First American determined the market potential for existing-home sales in March grew by 2.4 percent compared to February, an increase of 133,000 (SAAR) sales, and was also up 8.8 percent compared to a year ago.
“One reason for the widening underperformance gap relative to market potential is the duality of the supply and demand decisions in the housing market,” said Mark Fleming, chief economist at First American. “Excluding first-time homebuyers, which are a relatively small share of the overall market, most homebuyers are also home sellers. So, for most homebuyers, the decision to sell is dual to the decision to buy. Listing your home is most often dependent on whether you believe it’s a good time to buy. In the current market, sellers are worried about buying. Therefore, they likely won’t be selling either. The duality of the sell and buy decisions results in falling confidence, low inventory and rising prices.”
