New Home Sales Continue to Outperform
The housing market is the strongest sector in the entire economy
The experts at Zonda, the housing industry’s foremost advisors, released the New Home Pending Sales Index (PSI) for November 2020. The New Home PSI shows pending sales increased month-over-month and year-over-year across the United States. The index is a leading residential real estate indicator based on the number of new home sales contracts signed across the country.
The New Home PSI came in at 168.8 for November, representing a 44.9% increase from November 2019. On a month-over-month basis, new home sales rose by 0.7% from October.
“Another month brings another great report on new home sales,” said Ali Wolf, chief economist at Zonda. “Buyers remain enthusiastic about purchasing a home thanks to low interest rates and the work-from home economy. Builders are equally enthusiastic with one main gripe: they cannot build homes quick enough.”
Pending new home sales trended above November 2019 levels in every top market across the country.
The best new home markets in November were Jacksonville, Raleigh, and Atlanta. The top three markets provide great relative value. For example, new home communities in these markets offer a price per square foot that is among the lowest of other major cities. Furthermore, these markets, along with others in the Southeast, are in-migration magnets. The ability to work-from-home in the COVID-19 economy has allowed those in harsher climates or more expensive parts of the country to relocate more easily.
“Builders in some markets are starting to see modest signs of a seasonal slowdown from decade-highs, but demand is still far stronger than the levels seen last year” said Wolf. “Looking ahead, 2021 is expected to be another good year for housing with supply as the limiting factor.”
“Buyers remain enthusiastic about purchasing a home thanks to low interest rates and the work-from home economy. Builders are equally enthusiastic with one main gripe: they cannot build homes quick enough.”
New home data is susceptible to outsized swings in contract activity based on shifts in the number of actively selling communities. As a result, Zonda normalizes the data to ensure consistency across the index. The New Home PSI blends the cumulative sales of active or recently sold-out projects with the average sales rate per community, which adjusts for fluctuations in supply. Furthermore, the New Home PSI is seasonally adjusted based on each markets’ specific seasonality and removes outliers. The index is baselined to 100 for June 2016. Today’s national New Home PSI is 69% above the base level.
The next Zonda New Home PSI press release, featuring November 2020 data, will be issued on Monday, January 25, 2020 at 9:00 a.m. ET.