Existing-home sales outperformed their estimated potential for October on improved consumer buying power since the start of 2019 and lower mortgage rates, First American said.
However, buying power did decline on a month-to-month basis for the first time in 11 months, contributing in turn to a reduction in the estimate for potential sales.
Its Potential Home Sales Model found home sales during October outperformed what they should have been by 4.6% or 239,000 units on a seasonally adjusted annualized rate. This compares with September’s 0.8% above market potential and 6.5% below market potential in October 2018.
Meanwhile, the potential for existing-home sales fell to 5.17 million SAAR units from September, a decline of 0.6%. Compared with one year ago, the market potential increased by 0.6% or 33,050 SAAR units.
“In 2019, consumer house-buying power, how much home one can afford to buy given household income and the prevailing mortgage rates, surged and provided a significant boost to housing market potential,” Mark Fleming, First American’s chief economist, said in a press release. “Since the start of 2019, income has grown by 1.9% and mortgage rates have fallen by 0.77 percentage points, both dynamics sending house-buying power higher. As a result, house-buying power jumped 12% between January and October 2019.”
Interest rates rising 8 basis points between September and October reduced potential sales. Although household income increased…