“Saving for a down payment is one of the biggest hurdles to becoming a homeowner,” said Ali Wolf, Zonda’s Chief Economist.
COSTA MESA, Calif. (PRWEB) March 19, 2021
Today, the experts at Zonda, the housing industry’s foremost advisors, released the New Home Pending Sales Index (PSI) for February 2021. The New Home PSI shows pending sales decreased month-over-month but increased year-over-year 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 168.3 for February, representing a 35.0% increase from February 2020. On a month-over-month basis, new home sales fell by 2.4% from January.
This is the last report for a few months that provides a reasonable take on year-over-year housing trends before the comparisons get muddied by the pandemic slowdown in March, April, and early-May 2020.
We expanded our select markets list from 20 to 25 markets this month. Pending new home sales trended above February 2020 levels in 22 of our select 25 top markets. The best new home markets in February were Jacksonville, Cincinnati, and San Antonio. The homebuilding industry lost a week in February in parts of the South during the harsh winter weather, and yet contracts signed in top Texas markets surprised to the positive as sales were strong in the month otherwise.
The New Home PSI is made up of two components: new home orders and the average sales rate per community. New home orders look at total sales and will fall based purely on limited supply. The average sales rate per community captures how well builders are selling at the open communities and strips out the supply side. Both, however, can be negatively impacted by builders intentionally capping sales. The included table shows the year-over-year change for the two components and is sorted by the spread to quickly identify the markets where supply is impacting sales the most. Note that the PSI calculation includes weights and seasonal adjustments. The year-over-year changes in the table removes both and are just looking at the raw index values.
Jacksonville, the strongest for new home sales among our select markets, could be hitting ever better numbers if more inventory were available. The spread between new home orders and the average sales rate per community in Jacksonville is the highest rivaled only by Baltimore.
Salt Lake City slipped year-over-year on both measures on insatiable demand driven by a robust economy and positive migration trends causing builders to sell out of communities quicker than they can replace them and sales caps.
“70% of builders are intentionally slowing or pausing sales to better align contracts with production capacity, which makes drawing market conclusions more difficult,” said Wolf. “The underlying demand in the housing market is still there, though, even as prices and mortgage rates rise.”
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 68% above the base level.
The next Zonda New Home PSI press release, featuring March 2021 data, will be issued on Wednesday, April 21, 2021 at 9:00 a.m. ET.
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.
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.