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 October 2023.

New home sales dip amidst wild ride with mortgage rates

October home sales were in line with what we expected – cooler than September but still well above the same month last year. New home sales measured by Zonda were at 656,766 in October on a seasonally adjusted annualized rate, down 2.1% month-over-month but 29.4% above levels last year.               

When considering ‘normal’ seasonality, historically October performs slightly better than September. This year, we are seeing the opposite. That’s why we are calling this stage of housing activity “seasonality+.” We would expect to experience slower sales in the second half of the year compared to the first, but limited supply, affordability, and a record high of buyers thinking now is a bad time to buy is weighing on total transactions.   

“The story for the majority of October was that 8% interest rates were dampening demand as the “higher for longer” economic narrative took hold,” said Ali Wolf, chief economist for Zonda. “Starting in November, however, a series of slower and/or improving economic data points including the jobs report, stats on manufacturing, and inflation have shifted the narrative again, allowing for a modest reprieve in mortgage rates.”  

Sales pullback in October

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 656,766 new homes sold in October on a seasonally adjusted annualized rate. This was a decline of 2.1% from last month but an increase of 29.4% from a year ago. On a non-seasonally adjusted basis, 52,466 homes were sold, 29.9% higher than last year and 0.5% above the same month in 2019. New home sales volume is now 11% below the recent peak seen in July 2023.

PSI up significantly year-on-year due to soft comps

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 October PSI came in at 140.3, representing a 45.8% rise from the same month last year. The index is currently 19.4% below cycle highs. On a month-over-month basis, seasonally adjusted new home sales decreased 1.6%. 

• The markets that posted the best numbers relative to last year were Phoenix (+168.5%), Sacramento (+139.1%), and Las Vegas (+115.5%). These markets slowed dramatically last year but have since stabilized. The base effect of last year’s low levels is contributing to the large YOY percentages. 
• While no markets were down year-over-year, the metros that performed the worst were Baltimore (+3.3%), New York (+6.4%), and Washington, DC (+10.6%).  
• On a monthly basis, Denver, Minneapolis, and Phoenix were the best performing. 

54% of new home markets categorized as overperforming in October

In order to add further context on the metro level, we 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 National ZMR index came in at 112.6 in October, indicating a slightly overperforming market.  
• The major metros overperforming their historical averages most in October 2023 were Port St. Lucie, Fort Collins, and Columbia.  
• Only one market was significantly underperforming, Colorado Springs. Salt Lake City, Austin, Seattle, San Francisco, Portland, Cape Coral, and New York were slightly underperforming. 
• Among our top fifty markets, 54% were overperforming, 30% were average, and 16% were underperforming. Last month, 68% were overperforming, 24% were average, and 8% were underperforming.  

Entry-level pricing turned slightly negative         

National home prices increased year-over-year for move-up and high-end homes. Prices fell 0.1% for entry-level to $340,575 but rose 0.7% for move-up to $531,488 and 2.8% for high-end homes to $926,430. 

Supplementing our data with a monthly survey Zonda conducts, 16% of builders reported raising prices in October, down from 30% in September. Further, 71% reported holding prices flat, up from 64% last month. The percentage of builders reporting price increases has slowed as seasonality kicks in and builders further evaluate the affordability backdrop. 

Incentives are still common in today’s housing market to help address the affordability constraints for buyers. 57% of new home communities across the country were offering incentives in October, flat month-over-month. Many builders find incentives are necessary to help seal the deal with consumers. 

Little movement on community count 

There are currently 13,964 actively selling communities tracked by Zonda, up 0.9% from last year. On a month-over-month basis, the national figure slipped 1.8%. Total community count is 27.4% below the same month in 2019. The lack of competition from other new home communities is allowing 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. 

• Austin (+18.1%), Minneapolis (+13.7%), and Orlando (+10.1%) grew community count the most year-over-year. Relative to 2019, community count is down 13% and 30% in Austin and Orlando, respectively, but flat in Minneapolis.  
• Community count fell the most in Tampa (-15.0%), San Francisco (-14.5%), and Seattle (-11.8%) relative to last year. 
• Community count fell year-over-year in 96% of our select markets and 4% were flat. 

National quick move-ins (QMIs) totaled 28,748, down 17.3% compared to last year and 2.7% lower month-over-month. Total QMIs are 106.6% above 2019 levels. QMIs are homes that can likely be occupied within 90 days. 

QMIs are selling out quicker than they can be replaced in many markets as consumers view these homes as a great alternative to the resale market given the dearth of supply. The quick rise in QMIs last year led to price drops at many new home communities. We aren’t seeing the same build-up today. However, we are watching the trajectory of inventory in the coming months to see if the pullback in demand starts to result in QMIs rising again like we saw at the end of last year. 

• The markets that grew the most year-over-year were Salt Lake City (+41.3%), Cincinnati (+15.7%), and Las Vegas (+3.2%).  
• Salt Lake City, Las Vegas, and Phoenix have seen the most growth in QMIs compared to the same time in 2019, up 316.2%, 239.1%, and 126.2%, respectively.  
• QMIs are down the most compared to 2019 in Baltimore (-62%), San Francisco (-51%), and New York (-49%), three markets particularly limited by land and lot availability. 

Read past reports

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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