Mark Fleming, First American's chief economist, recently told Inman News that the primary cause of lagging home sales — and constrained inventory — remains the large share of homeowners with “negative equity,”
Negative equity is a result of owing more on a mortgage than a home is worth. Such homeowners are also referred to as being “underwater.”
Based on market fundamentals, Fleming said existing-home sales should have posted a seasonally adjusted annual rate of 6 million in March, 800,000 higher than the sales rate reported by NAR.
“Existing homeowners are the largest share of the existing-home sales market, and they can’t be homebuyers if they don’t have the sufficient equity to be home sellers. This is one of the key reasons we are observing tight inventory in many markets.”
Fleming bases the 6 million figure — what he calls the economy’s “capacity for annual existing-home sales” — on market fundamentals that traditionally drive existing-home sales: economic conditions, demographics (like population growth and household formation), interest rates and home price growth.
