The Existing Home Market Is Down Still From the Pandemic
Reports show that the market for potential existing home sales were down still from the pandemic. June 2022 showed an estimate of 5.47 million at a seasonably adjusted annualized rate of 13.1% which was lower than just one year ago and 2.5% lower than just last month. The housing market is still strong, however still down compated to before the pandemic.
The factors that drive the existing home sales market have changed. The housing market is still trying to adjust to a post-pandemic norm coupled with higher mortgage rates and high home prices. The current rise in home prices is not the norm. June 2022 saw sales decreased by 823,000 compared to June of 2021. There are many fundmentals that are causing the slow down. Declining House-Buying Power is one which is basically how much home a buyer can afford. Factors that are looked at include household income and the current 30-year fixed mortgage rate. Another is tighter credit standards which means when lending standards are tight, then it is harder for a potential buyer to become qualified. When it is harder for a buyer to get a loan, then homes are not going to sell. The last catalyst is increasing tenure. This year it is reported that tenure length has increase from 10.4 years to 10.6 years. This has been driven by low mortgage rates and potential sellers staying put.
On the otherhand there are several fundamentals that are boosting the housing market potential. The biggest we have seen is rising house prices. When home prices rise, the home owner’s equity becomes stronger. Another factor is rising household formation which means the more households formed, the higher the demand for home inventory. Lastly, there is more new home supply. Seller will not want to sell if there is nothing for them to buy.
The housing market potential for existing-home sales is down compared to last year because of the factors mentioned above but it is still a good time to purchase a home. If you are in the market for a home, find a local sales agent who can help you navigate the current housing market.
In order to find out the potential home sales, existing-home sales are measured which include single-family, townhomes, condos and co-ops. These are taken on a seasonally adjusted annualized rate that is factored by looking at the historical relationship between existing home sales and the country’s population, demographics, homeowner tenure, and pricing trends. This is all done through The Potential Home Sales model which is published by the National Association of Realtors.
