Housing market potential increased 2.1% in August. This marks the largest monthly increase since December 2020, according to First American’s Potential Home Sales Model.

Potential existing-home sales increased to a 5.61 million seasonally adjusted annualized rate (SAAR). This represents a 60.8% increase from the market potential low point of February 1993.

The market potential for existing-home sales decreased 12.9% year over year, a loss of 832,800 (SAAR) sales.

Currently, potential existing-home sales is 1,183,000 (SAAR), or 17.4% below the pre-recession peak of market potential back in April 2006.

First American Chief Economist Mark Fleming said a modest rise in house-buying power helped boost market potential.

“The 30-year fixed mortgage rate decreased by 0.19 percentage points, while median household income increased by 0.3% compared to one month ago,” said Fleming. “The result was a 2.5% increase in house-buying power, which increased housing market potential by over 47,000 sales.”

Additionally, household formation rose. This contributed over 4,000 potential home sales compared with July, Fleming said. New-home supply entered the market, increasing potential by nearly 1,300 potential home sales.

By contrast, Fleming said that homeowners unwilling to sell in this market along with economic uncertainty are the forces holding market potential back.

“The increase in housing market potential indicates that market conditions can fundamentally support more sales compared with one month ago. But, while the August decline in mortgage rates may have given buyers a brief reprieve from the rapid rise in rates over the last several months, it may not be enough to entice potential buyers to jump back into the market during uncertain economic times,” said Fleming. 

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