Pending New Home Sales Hit an Index High in June According to Meyers Research

COSTA MESA, Calif., July 22, 2020 /PRNewswire-PRWeb/ -- The New Home PSI came in at 132.2 for June, representing an 18.2% increase from June 2019. On a month-over-month basis, new home sales rose by 17.5% from May. June is historically a slower month than May, so the month-over-month gain shows that the traditional spring selling carried on later in the year.

"When life as we knew it got turned upside down, our homes became the only constant," said Ali Wolf, chief economist at Meyers Research. "The shift towards at-home work, school, and hobbies, however, resulted in a rethink of our space that propelled new home sales to the highest level since 2007."

Pending new home sales continued to show major locational differences, but all of the select 20 markets in the country posted month-over-month gains and nearly all trended above June 2019 as well.

The best new home markets in June were Raleigh, Cincinnati, and Tampa. Raleigh and Tampa had strong housing markets pre-COVID-19 and after a brief pause, buyers are back in full force. Lifestyle and positive net migration are two big contributors to the success for these housing markets today. In Cincinnati, the combination of a relatively low unemployment rate and extremely constrained resale inventory is helping builders attract buyers and gain market share.

"There is no doubt that sub-3.0% mortgage rates have played a big role in the rapid rebound of the housing market," said Wolf. "There aren't many more compelling reasons to buy a home than virtually free money."

Philadelphia, Los Angeles, and New York all posted substantial month-over-month increases but are still down compared to last year. In these markets, the relative underperformance is partly due to a lack of inventory. For example, the total number of new home projects for sale decreased in each market year-over-year and affordability in some of the remaining communities is constrained even with the lowest mortgage rates on record. Within each of these markets, however, some builders had a record-breaking sales month in June and are seeing homes fly off the shelf quicker than they can replace them.

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 32.2% above the base level.

The next Meyers Research New Home PSI press release, featuring July 2020 data, will be issued on Friday, August 21, 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.

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SOURCE Meyers Research