New Home PSI: COVID-19 took a bite out of new home sales in April

Pending new home sales fell 32.5% compared to last year with an improving trend starting in the latter part of the month. New home sales were off by 29.2% compared to March.

New Home Pending Sales Index For Select Markets

Pending new homes sales posted a drop on a year-over-year and month-over-month basis for all of the select markets.

• While each market uniformly saw a pullback related to the historic job losses, the extent of the decline was not universal. For example, even in the hardest hit markets, well-positioned and well-priced new homes are still hitting a solid (albeit slower than usual) sales pace because of the dearth of inventory in the existing home market.
• San Francisco, Los Angeles, and Washington, DC experienced the largest pullback in contract sales on a year-over-year basis. These markets have higher than average home prices, some denser urban real estate, and stricter stay-at-home orders, which contributed to many buyers deciding to pull a wait-and-see strategy.
• The impact of homes sales on the economy is vast both in terms of direct jobs added as well as the ripple effect on related industries. We will continue to monitor the housing rebound that started in mid-April and the impact on the wider economy.

“We posed the question at the beginning of March asking whether fear or low mortgage rates would prevail,” said Ali Wolf, Chief Economist at Meyers Research. “During the first six weeks of the pandemic, fear was the clear winner. As the stay-at-home orders get lifted, however, we are seeing the focus go back to rates. The duration of the job losses still acts as the wildcard though.” 

Methodology

The Meyers Research 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 15^th 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. Meyers Research monitors 18,000 active communities in the country and the homes tracked can be in any stage of construction.

The New Home PSI is susceptible to outsized swings in contract activity based on shifts in the number of actively selling communities. As a result, Meyers Research normalizes the data to ensure consistency across the index. The New Home PSI blends the cumulative sales of active or 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 data provided in this release are for use only by the primary recipient or the primary recipient’s publication or broadcast. This data may not be modified, resold, republished or licensed to any other source, including publications and sources owned by the primary recipient’s parent company without prior written permission from Meyers Research.