Zonda’s New Home Pending Sales Index rose 5.3% month-over-month as fewer builders capped sales with buyer interest holding steady. Builders report that some buyers are baulking at prices and that urgency from shoppers has mostly left the market, but in most cases, builders are still easily hitting their monthly goals.
Another month of muddy data
Home sales dropped 14.9% compared to last year but remain 20.8% higher than August of 2019.
New York, Las Vegas, and San Francisco were the three markets that posted a year-over-year increase in home sales. These markets were among those to rebound last in 2020 so the comp is easier to beat. We expect these markets will go negative year-over-year in the coming months but remain positive compared to 2019.
Salt Lake City, Riverside/San Bernardino, and Phoenix posted the biggest month-over-month increases. These markets have been beneficiaries of the work-from-home economy and remain attractive affordable alternatives to their coastal counterparts.
“The level of price growth is softening as the costs to build a home stabilize at high levels and consumers start to push back. New home inventory should be notably higher in 12 months’ time, allowing for some health to return to the housing market.”
Ali Wolf, Chief Economist at Zonda Economics
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.