The US housing market has been strong, with new and existing home sales showing increases in March 2021. Despite this strength, the market could face risks if the sale of homes slows down. Fannie Mae’s Economic and Strategic Research (ESR) group has found that home sales will remain resilient since the primary drivers of home sales are increasingly life events such as marriage, divorce, or inheriting a home rather than discretionary move-up buyers.

The primary factors that contribute to continued home sales include:
• Low Mortgage Rates: Mortgage rates remain low, especially when compared to the 10-year Treasury yield.
• Low Inventory: The record-low inventory of homes, resulting in fewer options to choose from.
• Favorable economic conditions: The outlook for jobs remains positive, particularly in areas largely backed by high-ranking industries.

These conditions are likely to remain stable throughout 2021, ultimately providing a cushion for home sales in the event of a future economic downturn. In addition, Fannie Mae’s ESR group suggests that the lack of current risk that the market faces due to life events driving sales rather than discretionary move-up buyers will limit the downside risk to the US housing market in the near term.

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