The New Home PSI is a unique measure of the housing market because it is made up of two components*: new home orders and the average sales rate per community. The new home orders component fell 16.4% year-over-year in March as supply continued to trickle lower. The average sales rate per community input also fell, decreasing 10.0% year-over-year.
New home orders, which look at total sales volume, have been significantly impacted with ever-decreasing active project count. In other words, sales are down primarily because inventory is scarce. The average sales rate per community captures how well builders are selling at the open communities and strips out the supply side. In today’s market, however, even the sales rate number isn’t capturing the full demand environment because 90% of builders are still capping sales. The new home order volume ticked lower while average sales pace again rose month-over-month on a non-seasonally adjusted basis and is at the highest level since April 2021.
“Mortgage rates averaged 4.17% in March and buyers have been reacting differently depending on their financial situation and motivation behind wanting to buy a home,” said Ali Wolf, Zonda’s chief economist. “Some buyers have been motivated by the rising interest rates to lock in their largest monthly cost, especially in a high inflation environment. Others have been deterred either by fear or financial force.”
Pending new home sales trended above March 2021 levels in just five of our twenty-five select markets, down from nine last month. Five of twenty-five of our select markets increased month-over-month. Riverside and New York both registered double-digit year-over-year gains, increasing 10.9% and 10.7%, respectively.