New Home PSI: the housing market posted an epic rebound in May

Pending new home sales continued the rebound that started in mid-April and posted a 16.7% month-over-month increase in May.

New Home Pending Sales Index For Select Markets

Pending new home sales showed major differences by market, but all but one of the select 20 markets in the country posted a month-over-month increase.

• Seattle was that select market with a decrease in sales month-over-month and year-over-year due to three main reasons: tough comps from a strong May 2019 and April 2020, a higher-than-average unemployment rate, and a lower community count. New home communities in Seattle that cater to tech workers are still selling at a strong pace. 
• The best new home markets in May were concentrated in the South, led by Houston, Jacksonville, and Tampa. Houston is the standout market given the one-two punch of COVID-19 and depressed oil prices. Builders in the market, however, focused on pivoting their price to better cater to first-time buyers over the past 24 months and that bet has paid off.  
• Overall, the housing market posted a substantial rebound in May that has carried on through June. Low mortgage rates, pent-up demand, more flexibility of location due to the shift to work-from-home, and an elevated savings rate helping with the down payment all fueled new home purchases.

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.