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 July 2024.

The new home market was stable in July

July was a month that had countervailing forces for prospective homebuyers. Mortgage rates dropped by .25% in the month, providing a (small) improvement in housing affordability. Meanwhile, stock market volatility increased in the middle of the month, impacting consumer confidence. The comments in Zonda’s monthly builder survey captured the choppiness. When asked to describe the housing market, builders said things like:

• The market is bumpy
• Sales are inconsistent
• Activity is up and down
• Slow but steady

The resulting impact was a housing market in July that was softer than earlier in the year but flat month-over-month. The Zonda Market Ranking showed sales were slightly overperforming nationally when adjusted for supply and seasonality. New home prices shifted down year-over-year, partly in response to demand and partly due to locational and home size changes.

“While July was not a blockbuster month for the new home market, many builders felt sales levels were reasonable given the time of year,” said Ali Wolf, chief economist with Zonda. “All eyes are now on what the next few months hold. The Fed will likely start cutting interest rates in September and the election will be over in November, both of which will provide much-needed clarity to prospective home shoppers.”

New home sales leveled off month-over-month

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 707,036 new homes sold in July on a seasonally adjusted annualized rate. This was a gain of 0.1% from last month and a drop of 3.5% from a year ago. On a non-seasonally adjusted basis, 59,890 homes were sold, 2.4% lower than last year and 12.4% above the same month in 2019.

Sales adjusted for supply flattened

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 July PSI came in at 140.6, representing a 2.3% drop from the same month last year. On a month-over-month basis, seasonally adjusted new home sales increased 1.0%. The index is currently 19.2% below cycle highs.

• The markets that posted the best numbers relative to last year were Cincinnati (+38.3%), Las Vegas (+15.1%), and Houston (+5.5%).
• Sales were down year-over-year in 18 of our select markets, led by Jacksonville, San Francisco, and Dallas.
• On a monthly basis, Los Angeles/OC, Cincinnati, and Minneapolis were the best-performing markets. Los Angeles/OC increased 21.6% relative to last month but is still down YOY.

The ZMR captured a stable market

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 the top production markets by region. Zonda also offers the ZMR for entry-level, move-up/move-down, and high-end markets. Subscribers of the National Outlook report can access all top markets and the tiered breakdown in Zonda’s portal. Non-subscribers can access the tiered maps for the select 10 markets by clicking below.

Get ZMR Maps

• The National ZMR index came in at 112.1 in July, indicating a slightly overperforming market, ranking in line with last month and this time last year.
• Zonda’s snapshot markets were split between 20% overperforming, 60% average, and 20% underperforming in July. Among Zonda’s top 50 markets, 54% were overperforming, 22% were average, and 24% 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.

Prices are down year-over-year

National home prices decreased year-over-year across entry-level, move-up, and high-end homes. Prices fell 2.7% for entry-level to $330,027, 1.8% for move-up to $517,423, and 1.1% for high-end homes to $904,467. The declines 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 lowered prices in July compared to June, 66% held prices flat, and 16% raised prices. In June, for comparison, 15% of builders lowered prices MOM, 68% held prices flat, and 17% increased prices.

QMI inventory slipped MOM

There are currently 14,771 actively selling communities tracked by Zonda, up 4.0% from last year. On a month-over-month basis, the national figure slipped 1.9%. Total community count is 23.4% below the same month in 2019. Zonda defines a community as anywhere where five or more units are for sale.

• Dallas (+18.8%), Atlanta (+10.3%), and Baltimore (+9.6%) grew community count the most year-over-year. Relative to 2019, community count was down 7.9%, 48.8%, and 61.2% in these markets, respectively.
• Relative to last year, the biggest community count declines were in San Francisco (-18.1%), Los Angeles/OC (-17.4%), and Philadelphia (-13.3%).
• Community count in 4% of our select markets rose month-over-month, 8% were flat, and 88% fell.

National quick move-ins (QMIs) totaled 30,793, up 10.0% compared to last year but 2.4% lower month-over-month. Total QMIs are 40.3% 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 QMI-heavy strategy to help capture today’s buyers. In some markets, however, resale inventory is rising and QMIs have become less desirable than 6 months ago.

• 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.

Subscribe for updates

Stay in the know with Zonda updates direct to your inbox. Subscribe today to receive webinar information, economics reports, podcast episodes, and more!