Although we’re still in the throes of a recession, the housing market — unlike other major industries — has been largely immune, rebounding strongly after hitting a low point in the spring.

According to a new report from First American Financial Corporation, housing market potential reached a 13-year high in August, as the market potential for existing-home sales increased 9.7% year over year to a seasonally adjusted rate of 5.92 million.

Potential home sales measure existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a seasonally-adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, homeowner tenure, house-buying power in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market.

According to First American’s latest Potential Home Sales Model, August’s reading represents a 70.8% increase from the market potential low point reached in February 1993.

“Housing has experienced a strong V-shaped recovery and is now exceeding pre-pandemic levels,” said First American Chief Economist Mark Fleming in the report. “This is largely because the economic distress from the pandemic has created a services-driven recession, disproportionally hurting younger, lower wage renters that are less likely to be homeowners or home buyers.

 This bifurcated economic landscape has allowed prospective home buyers who are still employed to take advantage of record low mortgage rates.

“Weekly purchase applications have surpassed their levels from one year ago for 17 straight weeks, due to a delayed spring season and the heightened demand from low rates,” said Fleming. “In August, these tailwinds propelled housing market potential to its highest level since 2007, driven by a 5.6% month-over-month jump in the market potential for existing-home sales, according to our Potential Home Sales Model.”

According to the report, while credit tightened dramatically in mid-April due to increased economic uncertainty driven by the pandemic, credit availability has loosened since then, boosting sales and market potential.

“When lending standards are tight, fewer people can qualify for a mortgage to buy a home,” Fleming said. “Likewise, when standards are loose, more people can qualify for a mortgage and buy a home. Credit loosening in August compared with last month increased housing market potential by 266,640 potential home sales.”

House-buying power, which increased 1.3% month over month in August, is yet another force driving the market.

“The house-buying power increase was driven by the combined impact of lower mortgage rates, which were 0.08 percentage points lower in August than the previous month, and a moderate increase in month-over-month household income,” he said. “The increase in house-buying power boosted market potential by approximately 28,180 potential home sales.”

Meanwhile, homeowners are feeling wealthier as home price appreciation continues, making them more likely to use that equity to purpose a larger or more desirable home. “In today’s housing market, fast rising demand against the limited supply of homes for sale has resulted in continued house price appreciation,” Fleming added. “Compared with last month, the growing wealth effect of rising equity caused by house price appreciation increased housing market potential by nearly 17,270 potential home sales.”

 While millennials continued to drive household formation growth in August, increasing market potential by 24,255 potential home compared with last month, tenure length in the U.S. continues to rise, as baby boomers increasingly opt to age in place. In addition, the boom in refinancing is having a negative impact on housing market potential, as existing owners who have refinanced into lower mortgages are less motivated to move.

“Since roughly two-thirds of all home buyers are existing homeowners, homeowners staying put reduces the available inventory of homes for sale for home buyers,” the report said.

While not invulnerable, the latest report predicts the real estate market will remain immune to the ongoing economic impacts of the coronavirus for now, Fleming said. “But as with the virus itself, we are not sure if immunity lasts forever.”