New Home Market Update

Zonda tracks 65% of the production new home market across the United States. Given the proprietary database, Zonda is uniquely positioned to capture trends and changes in the new home market. This report showcases the latest housing trends in the new home market for March 2024.

New home prices show sensitivity to mortgage rates

The U.S. economy has dealt the housing market some challenging cards. At the end of last year, we had a Goldilocks economy where growth was moderating. The recent inflation and employment releases show an economy picking up some steam. That plus investors feeling less enthusiastic about many short-term rate cuts has led to higher mortgage interest rates.

Sales were lower month-over-month, but the housing market still came in slightly overperforming for March, and Zonda’s survey captured that most builders said demand was on track with expectations. The most common concerns cited by builders were housing affordability and people choosing to sit on the sidelines.

“We are in a housing market today where people don’t have to move,” said Ali Wolf, chief economist for Zonda. “Existing homeowners are perfectly content staying put with their low interest rates, and many renters have decided to stay in place until there is more certainty. This means the market relies heavily on ‘life happens’ buyers – those driven by life events like marriage, divorce, children, or retirement.”

The spring selling season improved year-over-year

Zonda’s new home sales metric counts the number of new home contract sales each month and accounts for both cancellations and seasonality. This metric shows there were 695,337 new homes sold in March on a seasonally adjusted annualized rate. This was a decline of 7.0% from last month but an increase of 4.9% from a year ago. On a non-seasonally adjusted basis, 65,875 homes were sold, 5.7% higher than last year and 18.3% above the same month in 2019.

The New Home PSI fell month-over-month on higher rates

Total sales volume is influenced by both supply and demand. Zonda’s New Home Pending Sales Index (PSI) was created to help account for fluctuations in supply by combining both total sales volume with the average sales rate per month per community. The March PSI came in at 142.1, up 3.1% year-over-year. On a month-over-month basis, seasonally adjusted new home sales decreased 3.1%. The index is currently 18.4% below cycle highs.

• The markets that posted the best numbers relative to last year were Phoenix (+34.6%), Baltimore (+18.4%), and Tampa (+16.3%). March sales in these markets were up 21%, 19%, and 65% compared to 2019, respectively.
• Los Angeles/OC (-15.1%), Jacksonville (-12.3%), and Salt Lake City (-10.6%) declined year-over-year. Sales were up month-over-month in Jacksonville and Salt Lake City and down in Los Angeles/OC.
• On a monthly basis, Las Vegas, New York, and Salt Lake City performed best.

The national ZMR remained slightly overperforming in March

In order to add further context to sales, Zonda created the Zonda Market Ranking (ZMR). The ZMR accounts for both sales pace and volume, is seasonally adjusted, and is taken as a percentage relative to a baseline market average. Based on the percentage above or below baseline, markets are bucketed into performance groups ranging from significantly underperforming to significantly overperforming relative to historical activity.

The map below shows a snapshot of top production markets by region. Subscribers of the National Outlook report can access the full list in Zonda’s portal.

• The National ZMR index came in at 112.7 in March, indicating a slightly overperforming market, even with last month and last year.
• Zonda’s snapshot markets were split between 40% slightly overperforming, 40% average, and 20% slightly underperforming in March. Among Zonda’s top 50 major markets, 62% were overperforming, 22% were average, and 16% were underperforming.
• Importantly, the ZMR does not account for what it takes to sell a home. For example, securing a sale might still feel difficult in a significantly overperforming market, but if incentives offered result in a sale, we count the sale.

New home prices are down

National home prices decreased year-over-year across entry-level, move-up, and high-end homes. Prices fell 1.9% for entry-level to $331,436, 0.8% for move-up to $521,040, and 0.4% for high-end homes to $906,358. The declines represent smaller home sizes, differing locations, and select price drops.

Supplementing our data with a monthly survey Zonda conducts, 51% of builders reported raising prices in March, unchanged from February. Further, 44% reported holding prices flat, down from 46% last month.

Community counts have yet to budge

There are currently 14,555 actively selling communities tracked by Zonda, up 3.2% from last year. On a month-over-month basis, the national figure slipped 2.1%. Total community count is 24.7% below the same month in 2019. The lack of competition from other new home communities has allowed for some upward pressure on the average sales rate per month per community. Zonda defines a community as anywhere where five or more units are for sale.

• Dallas (+13.4%), Austin (+11.9%), and Salt Lake City (+9.6%) grew community count the most year-over-year. Relative to 2019, community count was down 11%, 13%, and 23%, respectively.
• The biggest community count declines relative to last year were in San Francisco (-22.6%), Philadelphia (-19.4%), and Cincinnati (-14.6%).
• Community count rose month-over-month in 8% of our select markets, 0% were flat, and 92% fell.

National quick move-ins (QMIs) totaled 26,533, down 5.9% compared to last year and 7.3% lower month-over-month. Total QMIs are 41.7% above 2019 levels. QMIs are homes that can likely be occupied within 90 days.

For many consumers, QMIs provide a great option given the lack of resale supply. As a result, some builders have pivoted to a more spec-heavy strategy to help capture today’s buyers.

• On a metro basis, 28% of Zonda’s select markets increased QMI count year-over-year. The markets that grew the most year-over-year were Riverside/San Bernardino (+36.8%), Cincinnati (+32.5%), and Dallas (+24.6%).
• Jacksonville, Sacramento, and San Antonio have seen the most growth in QMIs compared to the same time in 2019, up 192.4%, 157.0%, and 144.2%, respectively.
• QMIs are down the most compared to 2019 in Seattle (-65%), San Francisco (-61%), and Baltimore (-50%), three markets where geographic boundaries limit growth.

Are you interested in seeing past National Housing Market Update and Pending Sales Index reports? Access our report library to learn more.

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. 

About Zonda

Zonda provides data-driven housing market solutions to the homebuilding and multifamily industries. From builders to building product manufacturers, mortgage clients, and multifamily executives, we work hand-in-hand with our customers to streamline access to housing data to empower smarter decisions. As a leading brand in residential construction, our mission is to advance the home building industry, because we believe better homes mean better lives and stronger communities. Together, we are building the future of housing.

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