NEWPORT BEACH, Calif., Sept. 22, 2021 /PRNewswire-PRWeb/ -- Today, the experts at Zonda, the housing industry's foremost advisors, released the New Home Pending Sales Index (PSI) for August 2021. The New Home PSI shows pending sales grew month-over-month but declined year-over-year. 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 141.4 for August, representing a 14.9% decline from August 2020. The index is 20.8% higher than August 2019.
- On a month-over-month basis, seasonally adjusted new home sales posted strong growth from July to August, up 5.3%.
- The housing market is below peak activity seen in January 2021, trailing the cycle high by 18.8% on a seasonally adjusted basis. Conversely, the market remains historically strong and is still 13% above the pre-pandemic high seen in February 2020.
The New Home PSI is a unique measure of the housing market because it is made up of two components*: new home orders and the average sales rate per community. The new home orders component fell 29% year-over-year in August as supply has yet to reach bottom. The average sales rate per community input is also negative, falling 14% year-over-year due primarily to extreme success during the middle of last year.
New home orders, which look at total sales volume, have been significantly impacted with ever decreasing active project count. In other words, sales are down because inventory is scarce. The average sales rate per community captures how well builders are selling at the open communities and strips out the supply side. Both components rose on a nonseasonal adjusted month-over-month basis for the first time since January 2021.
"August's market showed a little pop in activity after the lull in June and July," said Ali Wolf, Zonda's chief economist. "The market is still down from the recent peak as buyer fatigue, high prices, seasonality, and limited inventory hold back sales, but August's tick up shows that underlying buyer demand remains intact."
Pending new home sales trended above August 2020 levels in just three of our 25 select markets, down from four last month. Housing's red-hot stretch started in June 2020 and continued that upward trajectory until peaking in August 2020 on a nonseasonal adjusted basis. Salt Lake City, which grew at the most on a month-over-month basis, remains at the bottom of the year-over-year change list because of the market strength this time last year.
The three markets that are currently up compared to the same month last year are lifestyle markets, with New York gaining most at 20.5% year-over-year, followed by Las Vegas and San Francisco. These markets experienced a slower rebound during the summer of 2020 due to both tighter COVID restrictions as well as more reliance on tourism.
The relationship between the percent change in the average sale rate and new home orders can reflect an imbalance of supply and demand. 24 of the 25 select markets posted a positive spread, indicating current levels of volume are being restrained by lack of supply. Sales pace remains up year-over-year in just five of Zonda's select markets, down from six last month. On the volume side, New York is the lone metro that posted an increase compared to last year. Zonda believe that home sales data will continue to be negative on a year-over-year basis throughout the balance of 2021 given the tough comps.
"The level of price growth is softening as the costs to build a home stabilize at high levels and consumers start to push back," said Wolf. "New home inventory should be notably higher in 12 months' time, allowing for some health to return to the housing market."
New home data is susceptible to outsized swings in contract activity based on shifts in the number of actively selling communities. As a result, Zonda 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 41.4% above the base level.
The next Zonda New Home PSI press release, featuring September 2021 data, will be issued on Friday, October 22, 2021 at 9:00 a.m. ET.
*Note that the PSI calculation includes weights and seasonal adjustments. The year-over-year changes related to the components removes both and are just looking at the raw index values.
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.
About Zonda
Zonda provides data-driven housing market solutions to the homebuilding and multifamily industries. From builders to building product manufacturers, mortgage clients, and multifamily executives, we work hand-in-hand with our customers to streamline access to housing data to empower smarter decisions. As a leading brand in residential construction, our mission is to advance the home building industry, because we believe better homes mean better lives and stronger communities. Together, we are building the future of housing.
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Media Contact
Valerie Sheets, Zonda, 949-294-9557, [email protected]
SOURCE Zonda
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