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December New Home PSI Shows Continued Rollercoaster for Homes Sales

Jan 24, 2022

December was a month that can be classified as ‘more of the same’ for the housing market as demand held up but a lack of available inventory held back total sales.

The housing market continues to be hamstrung by supply, labor, and lot shortages

  • The New Home PSI came in at 157.3 for December, representing a 5.3% decrease from December 2020 but a 35.2% increase from December 2019.
  • Las Vegas, San Francisco, and Minneapolis posted the largest month-over-month increases to finish out the year.
  • Los Angeles/Orange County registered the largest year-over-year increase in the PSI, jumping 36.4%, representing a cycle high. Orlando, San Antonio, New York, and Las Vegas also posted notable year-over-year gains.
  • 75% of builders in December reported adjusting their sales strategy to better align with production capacity.

The expectation is that new home supply will increase throughout the year but development and building delays continue to pose a challenge in trying to get more homes built.

Ali Wolf, Chief Economist, Zonda Economics

Methodology

The Zonda New Home Pending Sales Index (PSI) is built on proprietary, industry-leading data that covers 60% of the production new home market across the United States. Reported number of new home pending contracts are gathered and analyzed each month. Released on the 15th business day of each month, the New Home PSI is a leading indicator of housing demand compared to closings because it is based on the number of signed contracts at a new home community. Zonda monitors 18,000 active communities in the country and the homes tracked can be in any stage of construction.

The new home market represents roughly 10% of all transactions, allowing little movements in supply to cause outsized swings in market activity. As a result, the New Home PSI blends the cumulative sales of activity recently sold out projects with the average sales rate per community, which adjusts for fluctuations in supply. Furthermore, the New Home PSI is seasonally adjusted based on each markets’ specific seasonality, removes outliers, and uses June 2016 as the base month. The foundation of the index is a monthly survey conducted by Zonda. It is necessary to monitor both new and existing home sales to establish an accurate picture of the relative health of the residential real estate market.

 

 

 

 

 

Ali Wolf

Chief Economist

Ali Wolf

Chief Economist

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