SANTA ANA, CA—Although the market for existing-home sales is still underperforming its potential, it has made considerable gains on both a year-over-year and post-recession basis, according to data First American Financial Corp. released Wednesday. Potential existing-home sales decreased in March to a 5.5-million seasonally adjusted, annualized rate, a decline of 1.5% compared to February but an increase of 83.3% over the market potential low point reached in December 2008.

The market for existing-home sales is underperforming its potential by 2.3% or an estimated 129,000 SAAR sales, according to First American. Yet that's a 47% improvement compared to the year-ago period, when the the housing market for existing-home sales was underperforming its potential by an SAAR of 275,000 sales.

Compared to a year ago, the market for potential home sales is up 0.6%. “Despite higher mortgage rates, the potential for home sales increased on an annual basis driven by steady income and job growth, along with a surge in building permits,” says Mark Fleming, chief economist at First American. “While it may be a little late for this spring, the increase in building permits is a welcome sign that some relief may be in sight for the inventory shortages that are holding back many markets from realizing their full potential this spring.”