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 June 2024.

The U.S. housing market was categorized as slightly overperforming in June

The new home market is in the summer doldrums. After a solid start to the year, buyer confidence has tempered, and sales have followed. A shifting market this time of the year is not unusual, but consumers have the extra confidence hit of a presidential election, changes in Fed policy, and historically low housing affordability to consider. We account for some of this slowdown with our seasonal adjustments to our indices.

Mortgage rates continue to be a big part of the discussion. Every new piece of economic data moves mortgage rates up or down, adding to market uncertainty. The good news is – the consensus among five top forecasting firms, including Zonda, is that mortgage rates are more likely to be down than up over the next 18 months. Forecasts show a range of rates hitting between 6.5% and 7% by the end of this year and 5.9% to 6.6% by the end of next year.

“Securing home sales today still doesn’t feel easy,” said Ali Wolf, chief economist with Zonda. “Traffic is down in many communities as some buyers find the barriers to entry insurmountable. Builders are doing their best to respond; we’re seeing an increase in both the dollar amount of incentives offered and the aggressiveness of mortgage rate buydowns.”

New home sales held steady in June

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 725,895 new homes sold in June on a seasonally adjusted annualized rate. The percentage held flat month-over-month but reflects and increase of 3.7% from a year ago. On a non-seasonally adjusted basis, 61,677 homes were sold, 3.7% higher than last year and 10.3% above the same month in 2019.

The PSI remains higher than a year ago and is above 2023 levels

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 June PSI came in at 147.1, representing a 2.8% rise from the same month last year. On a month-over-month basis, seasonally adjusted new home sales increased 5.8% due to June historically being a slower month of the year. The index is currently 15.5% below cycle highs.

• The markets that posted the best numbers relative to last year were Las Vegas (+15.9%), Minneapolis (+15.5%), and Baltimore (+14.9%).
• Sales were down year-over-year in 11 of our select markets, led by Los Angeles, Dallas and Jacksonville.
• On a monthly basis, Las Vegas, Minneapolis, and Tampa were the best-performing markets. Las Vegas increased 20.6% relative to last month.

The national ZMR was slightly overperforming in June

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 116.2 in June, indicating a slightly overperforming market, ranking in line with last month and this time last year.
• Zonda’s snapshot markets were split between 40% overperforming, and 50% average, and 10% underperforming in June. Among Zonda’s top 50 major markets, 58% were overperforming, 22% were average, and 20% 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.

Entry-level and move-up still experiencing home price compression

National home prices increased year-over-year for high-end homes. Prices fell 1.7% for entry-level to $332,903 and 0.5% for move-up to $523,902, but rose 0.9% for high-end homes to $916,813. The declines for entry-level and move-up represent a mix of select price drops, smaller home sizes, and differing locations.

Supplementing our data with a monthly survey Zonda conducts, 18% of builders reported raising prices in June, down from 29% in May. Further, 69% reported holding prices flat, up from 57% last month.

QMIs ticked down slightly MOM in June

There are currently 14,612 actively selling communities tracked by Zonda, up 3.7% from last year. On a month-over-month basis, the national figure slipped 2.5%. Total community count is 24.5% below the same month in 2019. The lack of competition from other new home communities has allowed the average sales rate per month per community to hold up better. Zonda defines a community as anywhere where five or more units are for sale.

• Dallas (+16.5%), Atlanta (+10.1%), and Salt Lake City (+9.7%) grew community count the most year-over-year. Relative to 2019, community count was down 11.0%, 50.0%, and 22.3%, respectively.
• Relative to last year, the biggest community count declines were in San Francisco (-20.0%), Los Angeles/OC (-16.2%), and Philadelphia (-14.4%).
• Community count fell month-over-month in all of our select markets.

National quick move-ins (QMIs) totaled 29,390, up 11.5% compared to last year but 9.4% lower month-over-month. Total QMIs are 42.0% 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. In some markets, however, we are keeping an eye on the slope of change in QMIs to get a sense of how consumer demand is holding up.

• On a metro basis, 60% of Zonda’s select markets increased QMI count year-over-year.
• The markets that grew the most year-over-year were Cincinnati (+67.7%), Orlando (+38.4%), and Houston (+29.0%).
• Las Vegas, Cincinnati, and Sacramento have seen the most growth in QMIs compared to the same time in 2019, up 225.0%, 176.6%, and 154.8%, respectively.

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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