The New Home Pending Sales Index (PSI) from Zonda increased 3.2% from September to October to a reading of 156.6. The reading marks a 6.5% decline from October 2020 but is 35.2% higher than in October 2019. According to the PSI, the housing market is below peak activity from January 2021, trailing the cycle high by 10% on a seasonally adjusted basis. The market remains 25.7% above the pre-pandemic high from February 2020.
“October marks the third month where new-home sales rose compared to the month prior,” says Ali Wolf, Zonda’s chief economist. “Our latest forecast calls for growth in home sales in 2022 over 2021, but we will be watching affordability, the trajectory of mortgage rates, supply chain challenges, and housing inventory closely.”
Of the New Home PSI’s two components, the new-home orders component fell 20.4% on a year-over-year basis in October as supply continued to trickle lower. New-home orders, which look at total sales volume, have been impacted because inventory is scarce. The average sales rate per community component of the PSI was also negative in October, down 5% YOY. Despite the decline, the average sales rate per community input was at its lightest level since May 2021. The average sales rate per community captures how well builders are selling at the open communities and strips out the supply side.
“There remains pent-up demand from buyers across the age and income spectrum,” says Wolf. “These buyers are a mixture of people who have been unsuccessfully shopping since the start of the pandemic as well as buyers looking to lock in today’s historically low interest rates amid some volatility.”
Pending new-home sales trended above October 2020 levels in 10 of the index’s 25 selected markets, an increase from six in September. Twenty of the 25 markets increased month over month, with Las Vegas (-11.5%), Riverside/San Bernardino, California (-3.8%), Jacksonville, Florida (-2.6%), Salt Lake City (-1.3%), and Philadelphia (-0.4%) recording monthly declines. Twenty-four of the 25 markets posted a positive spread, with Sacramento as the only exception. The positive spreads indicate current levels of volume are being restrained by a lack of supply in the 24 markets. Sales pace remains up YOY in 11 of Zonda’s select markets, an increase from nine in September. New York was the only market to post an increase on the volume side compared with October 2020.
Click here to view the full Zonda New Home PSI report.
