New Home Sales Continues Its Stride in April, Zonda Reports

By Maria Kingston.
Updated May 22, 2021

NEWPORT BEACH, Calif. (PRWEB) May 22, 2021 - Today, the experts at Zonda, the housing industrys foremost advisors, released the New Home Pending Sales Index (PSI) for April 2021. The New Home PSI shows pending sales flattened 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 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 rose 40% year-over-year in April and the average sales rate per community input rose 80% year-over-year. Both are down modestly month-over-month.

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, which 91% of builders reported doing in April.

The year-over-year trends remind us how far the housing market has come over the past year, said Ali Wolf, Zondas chief economist. Sales plummeted for 4-8 weeks last March and April before Americans realized one thing: home had become more important than ever to them. Housing has been a big driver of economic growth ever since.

Pending new home sales trended above April 2020 levels in all of our top markets. The best new home markets were the ones hardest hit during the brief but sharp housing slowdown last year: Las Vegas, San Francisco, and Riverside/San Bernardino. Given the year-over-year comparisons are dependent on how much local housing markets slowed during April of 2020, the month-over-month is a better gauge this month. Contract sales in Seattle, Austin, and Cincinnati posted the best change on a month-over-month basis.

The input components give great color when trying to make sense of supply and demand. For example, the spread between the average sale rate and new home orders is highest in Riverside/San Bernardino, Los Angeles/OC, Baltimore, Las Vegas, and Tampa, which suggests a big supply and demand imbalance. This list includes some of the hottest markets in the country as well as those that are facing a particularly pronounced lot shortage.

Affordability is and will remain the top risk for the housing market, said Wolf. Buyers are eager to jump into todays markets, but with limited inventory, prices are skyrocketing, and competition is fierce. We are anticipating a bottom in inventory in the coming months, which should help normalize the market.

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. Todays national New Home PSI is 61% above the base level.

The next Zonda New Home PSI press release, featuring May 2021 data, will be issued on Monday, June 21, 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.