August saw a slight increase in new-home sales, but the housing market is cooler compared with last year, reports Zonda’s latest New Home Market Update.
The New Home Pending Sales Index (PSI) came in at 107.9, representing a 25% decline from the same month last year. The index is currently 38.1% below cycle highs. On a month-over-month basis, seasonally adjusted new-home sales increased 3.2%.
Looking at the market relative to last year, total contracts are down 25.1% year over year, and the average sales rate is off 26.1%. Nationally, sales are down 7.8% compared with August 2019 levels, led by the more notable slowdowns in the West and Mountain West regions.
“The buyer backdrop in the housing market today is complicated,” says Ali Wolf, Zonda’s chief economist. “We know that some housing demand was pulled forward over the past year driven by pandemic lifestyle changes and the abrupt drop in mortgage rates. Investor activity, second-home buyers, and purchases by some higher wealth individuals are good examples. We also know that some buyers were unable to be competitive enough over the past couple of years to secure a home and they remain pent-up demand waiting on the sidelines. This is the group we should focus on.”
Like last month, the PSI was up in just one of the select markets year over year, Cincinnati. Sales in the market were also up month over month.
Some of the markets that were hit the hardest and quickest in June and July saw a modest increase in August. On a monthly basis, Sacramento, Seattle, and Riverside/San Bernardino were the best performing markets and the metros that performed the worst year over year were San Francisco, Phoenix, and Denver.
National home prices increased year over year across entry-level, move-up, and high-end homes. Prices rose 13.9% for entry-level to $340,171, 11.2% for move-up to $527,874, and 7% for high-end homes to $896,549. The rate of home price growth flattened across all three price tiers in August.
Approximately 72% of builders reported increasing incentives month over month. Incentives are becoming increasingly prevalent in today’s housing market as consumer hesitancy slows overall purchase activity. Funds toward closing costs, mortgage rate buydowns, and discounts on options and upgrades are some of the most common types of incentives.
For community count, or any project that has five or more units for sale, there are currently 13,193 actively selling communities tracked by Zonda, down 10.2% from last year. On a month-over-month basis, the national figure slipped 1.4%. Total community count is 31.3% below the same month in 2019.
Sacramento, Las Vegas, and Riverside/San Bernardino grew community count the most year over year, while it fell the most in Baltimore, Atlanta, and Seattle. Community count in 12% of the select markets rose month over month, 0% were flat, and 88% fell.
National quick move-ins (QMIs), or homes that can be occupied within 90 days, totaled 23,439, up 98.1% compared with last year and 7.5% higher month over month. Total QMIs are 5.3% above 2019 levels.
On a metro basis, 96% of Zonda’s select markets increased QMI count year over year. The markets posting the biggest gains were Riverside/San Bernardino, Raleigh, and Tampa. Context is key though. QMIs are 32% higher than 2019 in Riverside but remain below pre-pandemic levels in Raleigh and Tampa.
Salt Lake City, Jacksonville, and Las Vegas have seen the most growth in QMIs compared with the same time in 2019.
Looking at September trends, mortgage interest rates have risen to the highest level since 2008, following the highest yield on the 10-year treasury since 2011. The volatility in the mortgage market combined with negative housing headlines, battered consumer confidence, and higher monthly housing costs suggest that the slower sales environment will likely continue throughout the balance of year, says the report.
