SANTA ANA, CA—Still another measure of the drag that the supply-demand imbalance is creating on the single-family home market comes from First American Financial Corp.'s latest Potential Home Sales model. In June, the market potential for existing-home sales suffered a 3.8% decline from the year-ago period, representing a sales drop of 220,000 units at a seasonally adjusted annualized rate.
“Demand for homes continued to remain strong this month, largely due to continued demand from more Millennials deciding they want to be homeowners,” says Mark Fleming, chief economist at First American. “Yet the supply of homes for sale continues to decrease.
“Existing homeowners fear not being able to find something affordable to buy, and a lack of residential construction workers is increasing the cost of building and slowing the pace of new construction,” he continues. “The result is a supply and demand imbalance that produces upward pressure on house prices and decreasing affordability.”
An encouraging note was sounded by the Census Bureau's latest statistics on new housing starts, issued Wednesday. Issues of permits rose 5.1% in June from a year ago, while starts were up 2.1%, which Fleming calls “a small step toward alleviating the supply shortage in the housing market.”
Nonetheless, he says, recent National Association of Realtors show existing-home inventories down 8.4% from the year-ago period. “Without more increases in housing starts, the inventory of homes for sale is likely to decrease further,” says Fleming. “The amount of completions necessary just to keep pace with growing Millennial demand is probably around 1.5 million units.” June's housing completions at a SAAR of 1.2 million units fall short of what is needed, he adds.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
