“September was the second month in a row where new home sales rose month-over-month. Buyers are showing resilience, with some of those on the sidelines starting to realize that housing has moved from scorching to simply hot…” Ali Wolf, Chief Economist, Zonda
NEWPORT BEACH, Calif. (PRWEB) October 22, 2021
Today, the experts at Zonda, the housing industry’s foremost advisors, released the New Home Pending Sales Index (PSI) for September 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 152.5 for September, representing a 9.5% decline from September 2020. The index is 31.2% higher than September 2019.
- On a month-over-month basis, seasonally adjusted new home sales posted strong growth from August to September, up 6.9%.
- The housing market is below peak activity seen in January 2021, trailing the cycle high by 12.4% on a seasonally adjusted basis. Conversely, the market remains historically strong and is still 22.4% 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 24% year-over-year in September as supply continues to trend lower as the market awaits new projects. The average sales rate per community input is also negative, down 7% 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 non-seasonal adjusted month-over-month basis for the second consecutive month.
“September was the second month in a row where new home sales rose month-over-month,” said Ali Wolf, Zonda’s chief economist. “Buyers are showing resilience, with some of those on the sidelines starting to realize that housing has moved from scorching to simply hot, and with that, the market is easier to navigate now than it was just 6 months ago.”
Pending new home sales trended above September 2020 levels in six of our twenty-five select markets, an increase from four last month. Twenty-three of twenty-five of our select markets increased month-over-month. The only two to decline were Minneapolis (-5.0%) and Las Vegas (-6.5%). The former also posted the largest year-over-year decline of the group.
The relationship between the percent change in the average sale rate and new home orders can reflect an imbalance of supply and demand. All 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 nine of Zonda’s select markets, an increase from five last month. On the volume side, Seattle is the lone metro that posted an increase compared to last year. Zonda believes 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 majority of builders are still saying that they would sell more homes if they had more homes to sell,” said Wolf. “The difficulty in today’s environment is that building constraints are everywhere you look.”
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 52.5% above the base level.
The next Zonda New Home PSI press release, featuring October 2021 data, will be issued on Monday, November 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.
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 numbers 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.
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