The Zonda New Home Pending Sales Index fell 13.2% year over year in July—down to a reading of 137.7—but is up 21.8% compared with July 2019. Month over month, seasonally adjusted new-home sales did not change significantly between June and July.
Despite its historic height, the New Home PSI is now 21% below its peak in January 2021. This indicates the extraordinary strength of the new housing market over the past few months; the index is 11% higher than the pre-pandemic high observed in February 2020.
The new-home orders component of the index fell 30% year over year in July, in response to dwindling supply. The average sales rate community component also fell 12% YOY, due to extremely strong comps in 2020.
According to Zonda data, 85% of builders throttled their sales in July in order to align sales with production capacity. “For a market that has been completely unpredictable, the drop in home sales is about as predictable as it gets,” says Ali Wolf, Zonda’s chief economist. “Last year, community count was higher, desirable vacant developed lots were available, and sales caps were unheard of. Trying to compare today’s home sales to last year is like comparing apples to oranges.”
Out of Zonda’s 25 select markets, pending new-home sales trended above July 2020 in just four, down from 14 in June. This is owed to the housing market’s strong performance in June and July 2020, particularly in Salt Lake City, Raleigh, North Carolina, and Phoenix, which are experiencing the greatest year-over-year declines. New York, Las Vegas, and Los Angeles are among the markets with rising pending home sales.
The spread between new-home orders and the average sales rate can reflect an imbalance of supply and demand. Twenty-four of the 25 markets showed a positive spread, indicating sales volume would rise if supply rose, assuming buyer interest is unchanged. Sales remained up year over year in six markets, while only New York showed an increase in new-home orders.
“The housing market is slower than it was a few months ago, but the market is far from slow,” says Wolf. “Supply constraints are a big reason home sales have slowed, but buyers have played a role as well. Distractions that come with this time of year combined with some buyers fed up with the hot housing market have brought demand levels back down to earth.”
