As we’ve learned from years of (sometimes horrific) black Friday sales, when Americans feel a surge of buying power, they’re going to shop — and very little can stand in their way. In January, that held true for housing, limited supply be damned.
First American has released results from its proprietary Potential Home Sales Model for the month of January 2021. According to the company, housing demand dynamics offset the negative impact of limited housing supply.
“At the onset of 2021, positive housing market dynamics powered growth in the market potential for existing-home sales, offsetting negative market supply dynamics. Millions more millennials will age into their prime home-buying age in 2021, and they will do so at a time of historically low mortgage rates,” said NEXT alumna and past speaker Odeta Kushi, deputy chief economist at First American.
On the other hand, Kushi admitted that the extremely limited supply of existing homes available for sale, especially homes priced for first-time home buyers, is working against market growth.
“In January, the positives of market demand overcame the negatives of supply, fueling a boost of approximately 512,000 potential home sales relative to one year ago,” Kushi said.
According to First American, the data for January suggest:
- Potential existing-home sales increased to a 6.17 million seasonally adjusted annualized rate (SAAR), a 0.4 percent month-over-month increase.
- This represents a 77.1 percent increase from the market potential low point reached in February 1993.
- The market potential for existing-home sales increased 9.0 percent compared with a year ago, a gain of 512,083 (SAAR) sales.
- Currently, potential existing-home sales is 712,052 million (SAAR), or 10.3 percent below the pre-recession peak of market potential, which occurred in April 2006.
This isn’t necessarily the kind of market that requires a proprietary model to predict growth, but it will be interesting to see what the model predicts as we get deeper into 2021.