Zonda’s New Home Pending Sales Index rose by 32.6% year over year in May to 150.0, in the first recorded measure of the turnaround in pending home sales growth following the housing downturn in March and April 2020. At the same time, the index is falling on a short-term basis, with a 3.6% drop in pending home sales from April to May.
“In housing, it is simple. If we had more homes to sell, more homes would be sold. We see this in the components of this index; the input that better tracks demand is up 34% compared to last year, and the input that better tracks supply is up only 2%. Both are skewed by sales caps,” says Ali Wolf, chief economist at Zonda.
The strength of the housing recovery varied by market, according to Zonda. Sales rose in 23 out of the top 25 markets. San Francisco sports the strongest YOY pending sales growth at 125.3%, followed by Los Angeles at 117.3% and New York at 115.7%. At the same time, Austin, Texas, and Salt Lake City have dipped into negatives at -9.3% and -11.4%, though Zonda attributes this to issues with supply.
Mortgage rates stand at about 3%—up significantly from 2.65% in January of this year but still low enough to serve as a tailwind for the market.
“Housing historically follows a seasonal pattern where spring is the most active time of the year. In 2020, the housing market remained strong even as the year progressed. The next few months will be a true test of housing’s underlying demand as people spend more time outside of their homes, but interest rates remain favorable,” says Wolf.
