COVID-19 Took A Bite Out Of New Home Sales In April, According To Meyers Research

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Today, the experts at Meyers Research, the housing industry’s foremost advisors, released the New Home Pending Sales Index (PSI) for April 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales decreased year-over-year and month-over-month across the United States. The index is a leading residential real estate indicator based on the number of new home sales contracts signed across the country.

Meyers Research April New Home Pending Sales Index

“Homebuilders felt the pain of the COVID-19-induced recession in April,” said Ali Wolf, chief economist at Meyers Research. “Interestingly though, our data shows more qualified buyers signed a contract towards the latter part of the month to take advantage of today’s low mortgage rates.”

Today, the experts at Meyers Research, the housing industry’s foremost advisors, released the New Home Pending Sales Index (PSI) for April 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales decreased year-over-year and month-over-month across the United States. The index is a leading residential real estate indicator based on the number of new home sales contracts signed across the country.

The New Home PSI came in at 73.8 for April, representing a 32.5% decrease from April 2019. On a month-over-month basis, new home sales fell by 29.2% from a revised-up March.

“Homebuilders felt the pain of the COVID-19-induced recession in April,” said Ali Wolf, chief economist at Meyers Research. “Interestingly though, our data shows more qualified buyers signed a contract towards the latter part of the month to take advantage of today’s low mortgage rates.”

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 and some denser urban real estate, which contributed to many buyers deciding to pull a wait-and-see strategy. These markets also have stricter stay-at-home orders that have continued through May that is impacting housing demand.

“We posed the question at the beginning of March asking whether fear or low mortgage rates would prevail,” said Wolf. “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.”

New home data 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 and removes outliers. The index is baselined to 100 for June 2016. Today’s national New Home PSI is 26.2% below the base level.

The next Meyers Research New Home PSI press release, featuring May 2020 data, will be issued on Thursday, June 19, 2020 at 9:00 a.m. ET.

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 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 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 Meyers Research. 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.

About Meyers Research
Meyers Research represents the housing industry’s leading provider of rich data, backed by Zonda and Metrostudy, and the industry’s top advisors for residential real estate development and new home construction. With products and services geared for homebuilders, multifamily developers, lenders, and financial institutions, we provide innovative solutions to maximize opportunities in today's real estate development landscape. To learn more, visit meyersresearchllc.com.

Meyers Research, Hanley Wood, Zonda, Metrostudy, and the company logo, are trademarks of Meyers Research, LLC and/or its subsidiaries.

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Jessica Brewer
Meyers Research
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