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Housing Market Predicted to Grow

Millions of Millennials will reach prime home buying age this year, in a time of low interest rates.

Housing market potential is positioned for growth in 2021, according to First American's potential home sales model. First American, reported in its recent study that potential existing-home sales increased to a 6.17 million seasonally adjusted annualized rate (all stats represent SAAR), a 0.4% month-over-month increase. This represents a 77.1% increase from the market potential low point reached in February 1993. Contributing factors include mortgage rates (which will remain close to 3%), millennials forming households, and more existing homeowners tapping into equity to upgrade. Today, potential existing-home sales is 712,052 million, or 10.3% below the pre-recession peak of market potential, which occurred in April 2006. Furthermore, the market for existing-home sales outperformed its potential by 3% or an estimated 183,790 sales, and the market performance gap increased by an estimated 136,731 sales from December 2020 to January 2021. First American's Chief Economist Odeta Kushi says housing-demand dynamics offset the negative impact of the country's limited supply of for-sale homes. "Millions more millennials will age into their prime home-buying age in 2021, and they will do so at a time of historically low interest rates,” said Kushi. “Working against them is the extremely limited supply of existing homes available for sale, especially homes priced for first-time homebuyers. In January, the positives of market demand overcame the negatives of supply, fueling a boost of approximately 512,000 potential home sales relative to one year ago."

Source: DSNews

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