Potential existing-home sales during December increased to a 6.15 million seasonally adjusted annualized rate (SAAR), up by 0.3 percent from November, according to new data from First American Financial Corp.
Compared to one year earlier, the market potential for existing-home sales increased by 1.1 percent compared with a year ago, a gain of 69,000 (SAAR) sales.
However, First American also warned that the market for existing-home sales is underperforming its potential by 9.6 percent or an estimated 593,000 (SAAR) sales. The market performance gap declined by an estimated 129,000 (SAAR) sales between November and December.
“In December, the market potential for existing-home sales in December increased 1.1 percent to a seasonally adjusted annualized rate of 6.15 million compared with a year ago, but the housing market still underperformed its potential by 9.6 percent, according to our Potential Homes Sales Model,” said Mark Fleming, Chief Economist at First American. “Month over month, the gap between actual existing-home sales and the market potential for home sales narrowed by 2.1 percent, but the housing market still has the potential to support more than 593,000 additional home sales at a seasonally adjusted annualized rate (SAAR).”
Fleming added that recent Wall Street convulsion were having an impact on the housing market’s viability.
“While mortgage rates are expected to continue to rise in 2019, last month’s stock market volatility has reversed the recent upward trend of mortgage rates,” Fleming continued. “It’s often overlooked that the popular 30-year, fixed-rate mortgage is closely tied to the 10-year Treasury bond. When the economy is doing well, investors prioritize investing in securities over bonds, driving higher longer-term Treasury yields, which also tends to increase mortgage rates. In December, the opposite happened. A steep sell-off in U.S. stocks caused by investors seeking safe-haven from global and domestic economic uncertainty caused the 10-year Treasury yield to decline, and mortgage rates fell alongside it ... The December drop in mortgage rates increased the market potential for existing-home sales by 0.3 percent.”