Zonda Provides New Home Market Update

Presidential elections historically don’t have a dramatic or long-lasting impact on the housing market, but this year was different. The combination of the election, anticipated future rate cuts, mortgage rate volatility, and housing affordability challenges resulted in more consumers stepping to the sidelines than normal. Once the election passed, however, consumers started to reengage.

In our November builder survey, 10% of builders reported that consumers were re-entering the market following the presidential election. In addition, builders said things like:

• “There was a slower start to the month, but sales picked up after the election”
• “The month started slow, but things picked up mid-month”
• “Sales have increased since the election from being down in recent months”

The survey results aligned with the sales data tracked in our Zonda database. New home sales hit their highest level in seven months, totaling 740,636 on a seasonally adjusted annualized rate. November sales activity was 15.7% higher than last year and 17.0% above 2019 levels.

“There’s no denying that incentives helped drive new home sales in November, especially for larger builders,” said Ali Wolf, chief economist at Zonda. “Our data captured that 75% of all new home projects were offering some kind of incentive on quick move-in supply. The important difference seen in November, though, was a lift in consumer confidence. The election was over – it was time to move on.”

A rebound in sales

Zonda’s new home sales metric counts the number of new home contract sales each month and accounts for both cancellations and seasonality. This metric shows there were 740,636 new homes sold in November on a seasonally adjusted annualized rate. This was a gain of 3.1% from last month and an increase of 15.7% from a year ago. On a non-seasonally adjusted basis, 54,574 homes were sold, 17.8% higher than last year and 13.8% above the same month in 2019.

The PSI rose 15.3% year-over-year

Total sales volume is influenced by both supply and demand. Zonda’s New Home Pending Sales Index (PSI) was created to help account for fluctuations in supply by combining both total sales volume with the average sales rate per month per community. The November PSI came in at 147.3, representing a 15.3% rise from the same month last year. The index is currently 15.4% below cycle highs. On a month-over-month basis, seasonally adjusted new home sales increased 3.4%.

• The markets that posted the best numbers relative to last year were Cincinnati (+63.6%), New York (+36.2%), and Sacramento (+29.6%). Cincinnati was up compared to the last year and grew 19.2% month-over-month.
• Inversely, the metros that performed the worst year-over-year were San Francisco (-36.0%), Tampa (-16.0%), and Riverside/San Bernardino (-1.4%).
• On a monthly basis, Baltimore, Cincinnati, and Los Angeles/OC were the best performing markets. Baltimore increased 20.0% relative to last month.

The ZMR was slightly overperforming for the 11th consecutive month

In order to add further context to sales, Zonda created the Zonda Market Ranking (ZMR). The ZMR accounts for both sales pace and volume, is seasonally adjusted, and is taken as a percentage relative to a baseline market average. Based on the percentage above or below baseline, markets are bucketed into performance groups ranging from significantly underperforming to significantly overperforming relative to historical activity.

The map below shows a snapshot of the top production markets by region. Zonda also offers the ZMR for entry-level, move-up/move-down, and high-end markets. Subscribers of the National Outlook report can access all top markets and the tiered breakdown in Zonda’s portal. Non-subscribers can access the tiered maps for the select 10 markets by clicking below.

Get ZMR Maps

• The National ZMR index came in at 119.3 in November, indicating a slightly overperforming market, ranking in line with last month but better than last year (average).
• Zonda’s snapshot markets were split between 80% overperforming and 20% average. None were underperforming in November. Among Zonda’s top 50 major markets, 70% were overperforming, 20% were average, and 10% were underperforming.
• Importantly, the ZMR does not account for what it takes to sell a home. For example, securing a sale might still feel difficult in a significantly overperforming market, but if incentives offered result in a sale, we count the sale.

Home prices rose for high-end homes

National home prices increased 0.4% year-over-year for high-end homes to $913,999. Prices fell 2.2% for entry-level to $327,682 and 1.3% for move-up to $517,479. The entry-level and move-up declines represent a mix of select price drops, smaller home sizes, and differing locations.

Supplementing our data with a monthly survey Zonda conducts, 23% of builders lowered prices in November, 68% held prices flat, and 9% raised prices. In October, for comparison, 18% of builders lowered prices MOM, 69% held prices flat, and 13% increased prices.

6% growth in community count year-over-year

There are currently 15,330 actively selling communities tracked by Zonda, up 6.0% from last year. On a month-over-month basis, the national figure grew 0.2%. Total community count is 20.0% below the same month in 2019. Zonda defines a community as anywhere where five or more units are for sale.

• Dallas (+15.1%), Tampa (+14.9%), and Baltimore (+11.1%) grew community count the most year-over-year.
• Relative to last year, the biggest community count declines were in San Francisco (-22.7%), Philadelphia (-18.9%), and Los Angeles/OC (-18.2%).

National quick move-ins (QMIs) totaled 31,346, up 6.2% compared to last year but 8.8% lower month-over-month. Total QMIs are 41.1% above 2019 levels. QMIs are homes that can likely be occupied within 90 days.

For many consumers, QMIs provide a great option given the lack of resale supply. As a result, some builders have pivoted to a more spec-heavy strategy to help capture today’s buyers. In some markets, however, resale inventory is rising and QMIs have become less desirable than earlier this year.