Zonda’s New Home Pending Sales Index rose to 141.4 in August, revealing a 5.3% month-over-month increase. Home sales dropped 14.9% compared with last year but remain 20.8% higher than August 2019.
Ali Wolf, chief economist at Zonda, says the month-over-month uptick is the result of fewer builders capping sales as buyer interest holds steady. Builders report that some buyers are balking at prices and that urgency from shoppers has mostly left the market, but, in most cases, builders are still easily hitting their monthly goals.
“There was a little pop in new-home activity in August after the lull in June and July,” says Wolf. “The market is still down from the recent peak as buyer fatigue, high prices, seasonality, and limited inventory hold back sales, but August’s tick up shows that underlying buyer demand remains intact.”
The housing market is below peak activity seen in January 2021, trailing the cycle high by 18.8% on a seasonally adjusted basis. Conversely, the market remains historically strong and is still 13% above the pre-pandemic high seen in February 2020.
New-home orders fell 29% year over year in August as supply has yet to reach bottom. The average sales rate per community input is also negative, falling 14% year over year, due primarily to extreme success during the middle of last year.
Sales in three of 25 select markets rose year over year, led by New York, Las Vegas, and San Francisco at 20.5%, 14.4%, and 0.2%, respectively. These markets were among those to rebound last in 2020 so the comp is easier to beat. Wolf expects these markets will go negative year over year in the coming months but remain positive compared with 2019.
Salt Lake City, Riverside/San Bernardino, California, and Phoenix posted the biggest month-over-month increases with 21.9%, 20%, and 19.7%, respectively. These markets have been beneficiaries of the work-from-home economy and remain attractive affordable alternatives to their coastal counterparts.
“The level of price growth is softening as the costs to build a home stabilize at high levels and consumers start to push back,” continues Wolf. “New-home inventory should be notably higher in 12 months’ time, allowing for some health to return to the housing market.”
