Housing is off from the highs seen early this year but consumers are still interested in the new home market. Zonda’s New Home Pending Sales Index rose 6.9% month-over-month and is 31.2% above September 2019 levels.
Another month of solid sales
Twenty-three of our select twenty-five markets increased month-over-month, led by Cincinnati, Philadelphia, and Seattle.
San Francisco, Seattle, and New York posted the largest year-over-year change, up 12.2%, 4.4%, and 3.6%, respectively.
Nearly 72% of builders in Zonda’s division president survey reported that sales were either on track or exceeded their expectations for September.
The relationship between the percent change in the average sale rate and new home orders can reflect an imbalance of supply and demand. All twenty-five select markets posted a positive spread, indicating current levels of volume are being restrained by lack of supply.
The majority of builders are still saying that they would sell more homes if they had more homes to sell. The difficulty in today’s environment is that building constraints are everywhere you look.
Ali Wolf, Chief Economist, Zonda Economics
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.
