Strong housing demand continued to outpace supply in June, in large part because millennial buyers are on the rise, according to First American Financial Corp.

The market potential for existing-home sales declined by 3.8% in June from the previous year, but increased by a seasonally adjusted annualized rate of 45,000 sales from May 2017 to June 2017.

Inventory shortages causing quickly rising home prices are affecting affordability, which is down 11% from May of last year.

"Demand for homes continued to remain strong this month, largely due to continued demand from more millennials deciding they want to be homeowners. Yet, the supply of homes for sale continues to decrease," said Mark Fleming, chief economist at First American, in a press release.

"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 continued.

New construction home permits fell 4.9% from April to May of this year, according to the U.S. Census Bureau. As new construction supply continues to stall, so does the market potential for home sales.

"The decline in residential construction employment is dragging down housing starts, a critical source of housing supply," said Fleming. "It's very hard to increase housing starts without increasing residential construction employment."

Potential existing-home sales are currently 14% below the July 2005 pre-recession peak of market potential.

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