NEWPORT BEACH, Calif., July 22, 2021 /PRNewswire-PRWeb/ -- Today, the experts at Zonda, the housing industry's foremost advisors, released the New Home Pending Sales Index (PSI) for June 2021. The New Home PSI shows pending sales rose month-over-month and 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 147.1 for June, representing a 2.4% increase from June 2020.
- On a month-over-month basis, seasonally adjusted new home sales rose from May to June.
- Due to the housing market's immense strength in the summer months of 2020 paired with sales caps and supply limitations, year-over-year declines are to be expected in coming months.
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 20% year-over-year in June as supply issues mounted. The average sales rate per community input rose just 5% year-over-year held back by sales caps and tough comps in 2020.
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 are builders intentionally throttling sales. Despite declining for four consecutive months on MoM basis, the average sales rate per community remains 16% above the pre-pandemic high, whereas new home order volume is 14% below.
"Everyday distractions are back for home shoppers causing some builders to move further down their interest lists. Fortunately, the demand pool remains deep," said Ali Wolf, Zonda's chief economist. "Countervailing forces will pick up in the coming months though as mortgage rates offer a boost but the expected drop in home sales will spook some buyers."
Pending new home sales trended above June 2020 levels in fourteen of our twenty-five select markets, down from twenty-three last month. After rising off the bottom in May of last year, June 2020 was when the housing market began to kick into overdrive for some metros like Salt Lake City, Phoenix and Austin. It is in these early-to-recover markets where sales are currently experiencing the largest YoY declines as builders hurry to replenish their housing inventory. Lifestyle markets like New York, Los Angeles and San Francisco experienced more severe COVID-19 limitations and rebounded later. The PSI in these markets is up the most year-over-year.
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 have a positive spread, indicating volume would rise by simply increasing supply assuming today's buyer interest is unchanged. Sales remain up year-over-year in terms of the average sales rate in nearly 70% of Zonda's select markets, whereas just 24% posted an increase in new home orders compared to last year.
"Housing demand is ever so slightly slower than a few months ago, largely because of seasonality," said Wolf. "Seasonality is a normal part of the housing market that was notably absent in 2020. The seasonality in 2021 is met by some buyers pausing their home search due to high prices or frustration with the competitiveness but the overall housing market remains strong."
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 47.1% above the base level.
The next Zonda New Home PSI press release, featuring July 2021 data, will be issued on Friday, August 20, 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.
Media Contact
Valerie Sheets, Zonda, 949-294-9557, [email protected]
SOURCE Zonda
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