COSTA MESA, Calif., Jan. 25, 2021 /PRNewswire-PRWeb/ -- Today, the experts at Zonda, the housing industry's foremost advisors, released the New Home Pending Sales Index (PSI) for December 2020. 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 158.3 for December, representing a 36.0% increase from December 2019. On a month-over-month basis, new home sales fell by 3.6% from November.
"We have every type of buyer engaged today, whether that's first-time, move-up, luxury, retiree, investor, second home, and even relocation," said Ali Wolf, chief economist at Zonda. "The seemingly universal interest combined with tight inventory is driving home prices up, but low mortgage rates are offsetting the impact for now."
Pending new home sales trended above November 2019 levels in every top market across the country except Seattle. Seattle's drop is directly related to fewer new homes for sale. For example, the sales pace at new home communities has held steady, but community count is down 27% year-over-year.
The best new home markets in December were Jacksonville, Raleigh, and Atlanta, the same top three markets as last month. Builders in these markets benefit not only from the low interest rates and the work-from-home economy, but also from the diverse labor markets, temperate climates, and relative housing affordability.
"When monitoring the new home market, one must understand the intricacies," explains Wolf. "For example, community count is down 17% year-over-year nationally and some builders are intentionally only releasing a few homes for sale each month. These factors will naturally hold back sales without there being a fundamental shift in demand."
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 58% above the base level.
The next Zonda New Home PSI press release, featuring January 2021 data, will be issued on Monday, Feb. 22, 2020 at 9 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.
Jessica Brewer, Zonda, 9162243047, [email protected]