January’s New Home Pending Sales Index shows that new home contracts are 13.1% stronger than last year and 3.6% higher than two years ago after adjusting for supply and seasonality. When looking at the month in isolation, the latest read captures the best January so far this cycle.
The Index came in at 118.4 for January, representing a 13.1% increase from January 2019. On a month-over-month basis, new home sales increased by 0.8% between December 2019 and January 2020.
Markets Driving The Increase In New Home Pending Sales
Nine of the 10 key markets grew year-over-year, led by San Francisco, Los Angeles, and Denver.
New home pending sales in Phoenix are up a strong 16.0% compared to two years ago, which highlights the current strength of the market. On a per community basis, builders are hitting the highest rate since the index’s inception.
The strong annual clip for Los Angeles and San Francisco is less robust when put in context. Both markets are lower compared to two years ago, with Los Angeles sales 19.3% below January 2018 and San Francisco down 24.3%.
“The new home data captures the underlying strength of today’s housing market,” said Wolf. “January’s read was the best so far this cycle as consumers brush off the election and coronavirus woes and focus on the opportunities in today’s housing market.”
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 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. 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.