Meyers Research: New Home Buyers Undeterred In Feb.

COSTA MESA, CA — Today, the experts at Meyers Research released the New Home Pending Sales Index (PSI) for February 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales increased year-over-year and month-over-month 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 122.7 for February, representing a 16.4% increase from February 2019. On a month-over-month basis, new home sales increased by 3.6% between January and February 2020.

"Consumers were home shopping at cycle-highs in February," said Ali Wolf, chief economist at Meyers Research. "Low mortgage rates and beating the spring selling season rush were two main contributors to the burst of action."

Nine of the 10 key markets grew year-over-year. San Francisco, Los Angeles, and Denver experienced the most significant growth compared to last year, up 57.1%, 40.1%, and 31.7%, respectively. Eight of the ten markets grew on a month-over-month basis, led by Atlanta. 

Given the easy comp from the slowdown in late-2018 and early-2019, looking at the two-year trend is very telling. The national index is 8.1% higher than February 2018. The spring selling season in 2019 returned to normal levels of volume so the need to review the data on a two-year basis will only apply to new home sales for the next couple of months.

New home pending sales in Phoenix are up a strong 21.0% compared to two years ago, which highlights the strength of the market heading into March, the start of the particularly uncertain period brought on by COVID-19. Houston, a market vulnerable to the recent dramatic drop in oil prices, was experiencing robust housing demand last month, up 12.1% year-over-year and 8.5% compared to February 2018.

The strong annual clip for Los Angeles and San Francisco is less robust when put in context. Both markets are lower compared to two years ago, with Los Angeles sales 11.7% below February 2018 and San Francisco down 22.1%.

"The February data captures housing activity ahead of the increased uncertainty around COVID-19." said Wolf. "With containment measures increasing by the day, traffic in the new home market is expected to slow in the coming weeks. Even still, the recent trend for housing captures strong demand that will likely rebound quickly when the coronavirus recedes."

New home data is susceptible to outsized swings in contract activity based on shifts in the number of actively selling communities. As a result, Meyers Research 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 22.7% above the base level.

The next Meyers Research New Home PSI press release, featuring March 2020 data, will be issued on Tuesday, April 21, 2020 at 9:00 a.m. ET.

Methodology 

The Meyers Research 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. Meyers Research 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 Meyers Research. 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.

To learn more about Meyers Research, visit meyersresearchllc.com.