The spring buying season will not be held back by the rate hike
America’s leading financial company released the exclusive ownership of First American Potential home sales model for the month of February 2021, which revealed that the rate hike will not slow down the spring buying season.
According to the report, potential existing home sales increased at a seasonally adjusted annualized rate of 6.26 million, a 1.3% increase month over month. This represents an increase of 79.6% from the low point of the potential market reached in February 1993. The report also found that the potential market for existing home sales was up 12.2% from a year ago. year, a gain of 682,900 SAAR sales. Currently, potential sales of existing homes are 7.8% below the peak of pre-recession market potential, which occurred in April 2006.
“In February 2021, the housing market potential reached its highest level since 2007, despite the largest monthly increase in mortgage rates since October 2019. Housing market potential rose 1.3% in February compared to month before, and 12.2% last year. -on year, “said Mark Fleming, chief economist at First American. “While the increase in the average tenure has been the main drag on the potential of the housing market this month, the increase in the purchasing power of housing still on the rise, more flexible credit standards and strong household formation outweighed the negative impact of the limited supply, both new and existing. Entering the home buying season in the spring, this momentum is poised to support the continued strength of the housing market. “
“While mortgage rates rose a modest 0.08 percentage point in February, home purchasing power was slightly higher this month thanks to an increase in median household income. Still, the gains Most of the market potential has come from household formation. Growth in household formation has contributed to nearly 13,000 potential home sales, “Fleming added.” Buying a home is not just a financial choice but also a choice of lifestyle Millennials are reaching their peak home buying years in large numbers and have probably been considering buying a home for some time A slight increase in rates can provoke some millennials. to adjust their price, but that won’t necessarily dissuade them from buying a home. “
Unfortunately, finding a home to buy will be a difficult task this buying season. According to Fleming, most existing homeowners have little incentive to sell because they’ve frozen historically low rates. The reluctance to sell will have a huge impact on the number of homes for sale, according to the report. the lack of new construction also limited stocks.
“One way to solve the supply problem is to build new houses, but headwinds of construction limited the ability of home builders to build enough housing to meet housing demand, ”Fleming said.
While buyers will likely face a few hurdles ahead, Fleming still expects the market potential for existing home sales to remain high.
“All factors taken into account, the market potential for existing home sales remains well positioned to continue to increase. The economy will likely continue to improve as vaccine rollout accelerates. With higher vaccination rates. higher, consumer and lender confidence will rise and a stronger labor force market, “Fleming said.” Even as mortgage rates continue to rise, increasing household formation, coupled with more favorable market conditions, will maintain strong demand for home purchases. recent increase in housing starts means home builders get new construction projects done, which will help alleviate some of the long-term supply shortage. But now? Expect continued strong demand and limited supply, which means the spring home buying season will unfold at a selling speed never seen before. “
Click here to learn more about the report.