TheMReport

42 | TH E M R EP O RT SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Are Americans Prisoners in their Own Homes? With low inventory and rising prices, existing homeowners are feeling trapped into staying put. P otential existing home sales increased to a 5.72 million seasonally adjusted, annualized rate (SAAR) and a 1.8 percent month- over-month increase, according to recent data from First American. Since the market low in Decem - ber 2008, this is a 90.3 percent increase. Market potential for existing home sales fell by 1.1 percent compared to 2016, a decline of 62,000 (SAAR) sales. As of May, potential existing home sales are 644,000 (SAAR), or 11.2 percent, under the July 2005 pre-recession peak of market potential. "As more and more millennials marry and have children—among the strongest determinants for the desire to be a homeowner—de - mand for housing will remain robust," said Mark Fleming, Chief Economist at First American. "However, the housing market faces a dilemma that is restrict - ing the inventory of homes for sale. As rates rise and the cost to finance a mortgage increases, existing homeowners are prison - ers in their own homes. In addi- tion, the fear of being unable to find a home to purchase hinders homeowners' decision to sell." Existing home sales are underperforming their potential by 3.8 percent or an estimated 218,000 (SAAR) sales. Between April 2017 and May 2017, market potential grew by 1.8 percent over the month—an increase of 98,000 (SAAR) sales. "When considering the right time to buy or sell a home, an important factor in the decision should be the market's overall health, which is largely a func - tion of supply and demand," Fleming said. "Knowing how close the market is to a healthy level of activity can help con - sumers determine if it is a good time to buy or sell, and what might happen to the market in the future. That's difficult to as - sess when looking at the number of homes sold at a particular point in time without under - standing the health of the market at that time. Historical context is critically important. Our poten - tial home sales model measures what we believe a healthy mar- ket level of home sales should be based on the economic, demo- graphic, and housing market environments." "The fear of being unable to find a home to purchase hinders homeowners' decision to sell." —Mark Fleming, Chief Economist, First American

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