COSTA MESA, CA — The experts at Zonda, a leading residential construction brand, recently 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.”
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.
Methodology
The Zonda New Home Pending Sales Index (PSI) is built on proprietary, industry-leading data that covers 60% of the production new home market across the United States. Reported number of new home pending contracts are gathered and analyzed each month. Released on the 15th business day of each month, the New Home PSI is a leading indicator of housing demand compared to closings because it is based on the number of signed contracts at a new home community. Zonda monitors 18,000 active communities in the country and the homes tracked can be in any stage of construction.
The new home market represents roughly 10% of all transactions, allowing little movements in supply to cause outsized swings in market activity. As a result, the New Home PSI blends the cumulative sales of activity 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, removes outliers, and uses June 2016 as the base month. The foundation of the index is a monthly survey conducted by Zonda. It is necessary to monitor both new and existing home sales to establish an accurate picture of the relative health of the residential real estate market.