In the face of an extreme seller’s market, April home purchases overshot expectations, according to First American.
The Potential Home Sales Model showed April buyers beat projections by 4.4% or about 277,400 units. The model increased 1.3% from March, 30% from the year before and 16.7% compared to the non-pandemic conditions of April 2019.
This rise pushed up the seasonally adjusted annualized rate of potential existing home sales to 6.31 million from 6.26 million in March. Low interest rates and household income growth led to an increase of $6,900 in purchasing power, driving the exceeded forecast. However, the current environment sets up a challenging landscape for both buyers and sellers to navigate going forward.
“The risk of selling in a market with a shortage of inventory prevents many existing homeowners from putting their homes on the market,” Mark Fleming, chief economist at First American, said in the report. “Existing homeowners staying put accounted for more than 15,000 fewer potential home sales in April. You can’t buy what’s not for sale, even if you can afford it.”
The average homeowner tenure length hit 10.56 years in April, climbing from 10.5 years in March and falling from about 12 years in April 2020. April’s housing starts drifted lower, even with a small increase in builder applications from the previous month, as supply chain issues kept the numbers in check overall.
Slight relief could be on the way with spring’s typical seasonal boost, but it probably won’t move the needle much in the near term. Fleming described the ongoing historical inventory shortage as “the Great Housing Supply Crash” in a blog post from Wednesday.
“While a growing economy and improving public health conditions may spur hesitant existing owners to list their homes for sale, it’s unlikely to significantly ease the super sellers’ market conditions,” he said.
