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Is the Housing Market Living Up to Its Potential?

Phil Hall
Mar 21, 2017
Potential existing-home sales decreased to a 5.7 million seasonally adjusted, annualized rate (SAAR) in February while the market potential for existing-home sales fell by 0.5 percent compared January

Potential existing-home sales decreased to a 5.7 million seasonally adjusted, annualized rate (SAAR) in February while the market potential for existing-home sales fell by 0.5 percent compared January, a 28,000 (SAAR) sales decline, according to data released by First American Financial Corp.
 
First American noted that the potential existing-home sales level is now 658,000 (SAAR) or 11.5 percent below the pre-recession peak of market potential from July 2005. The company also stated that 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.
 
“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.”
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