First American released its proprietary Potential Home Sales Model for the month of June 2021, and the company’s chief economist, Mark Fleming, says, “While actual existing-home sales have declined for four months in a row, the market potential for existing-home sales has increased… Based on this month’s analysis, actual existing-home sales are moderating primarily due to a lack of supply.”
Fleming says that many believe that the moderation in existing-home sales is due to a pullback on demand. However, he explains that “examining market dynamics with our Potential Home Sales Model indicates the moderation in home sales is the result of a lack of supply more so than a falling demand. Econ 101 tells us that a decline in supply can result in a market with fewer sales and higher prices, which is exactly what’s happening in the housing market today.”
The company states that it’s homebodies that are locking up housing supply.
“The average length of time a homeowner lives in their home reached another historic high in June, according to First American Data & Analytics data, resulting in approximately 11,000 fewer potential home sales,” said Fleming.
He adds that pre-2007, the average length of time a homeowner lived in their home was about five years. Today, that’s more than doubled at 10.62 years — which is a historic high.
“On a year-over-year basis, the length of time homeowners live in their homes increased 3.8 percent, resulting in approximately 160,000 fewer potential home sales,” he said. “Clearly, a lack of supply is depressing the market potential for existing-home sales.”