Spring selling season has started early again in 2023, according to Zonda.
Spring selling season has started early again in 2023, according to Zonda.

The spring selling season of 2024 has gotten off to a strong start, with the February new-home sales increasing 11.4% compared to a year ago, according to Zonda. Zonda’s new home sales metric estimates there were 718,098 new homes sold on a seasonally adjusted basis in February, down slightly from January levels.

On a non-seasonally adjusted basis, 61,799 homes were sold in February, 13.5% higher than last year and 6.4% above February 2019 levels. Revised Zonda numbers show 671,000 new homes were sold in the full year of 2023, an 11% increase from 2022.

The U.S. Zonda Market Ranking (ZMR) for February came in as slightly overperforming, up from average in the same period of 2023. While higher interest rates and prices have deterred some buyers, those with a strong need for a home are finding ways to make home purchases happen, including with the ongoing assistance of home builder incentives.

The strength of the new-home market comes as the resale market remains constrained. Existing-home inventory increased 15% year over year, but still remains 40% lower than pre-pandemic levels. In response to limited inventory, home builders have ramped up starts activity, with 80% planning to increase their build rate in 2024 compared to 2023, according to Zonda.

“We need to remember not to paint the housing market with a broad brush,” Zonda chief economist Ali Wolf says. “Market strength varies greatly by region and price range. For example, eastern markets are generally outperforming the West, and high-end homes are selling fast relative to themselves due to less price-sensitive buyers.”

Zonda’s New Home Pending Sales Index (PSI), which accounts for fluctuations in supply by combining total sales volume with the average sales rate per month per community, came in with a reading of 141.5 in February, a 10.9% increase from February 2023 levels. The index remains 18.7% below cycle highs, but also improved 2.3% on a month-over-month basis.

The markets that experienced the strongest increases relative to last year were Phoenix (+34.9%), Denver (+34.1%), and Las Vegas (+33.7%). Each metro also posted increases in the PSI of greater than 20% compared to 2019.

The PSI declined year over year in San Francisco (-11.8%), Jacksonville (-9.9%), and Dallas (-6.0%). On a monthly basis, Cincinnati, Denver, and Jacksonville performed best, according to the PSI.

The ZMR—which accounts for both sales pace and volume, is seasonally adjusted, and its taken as a percentage relative to a baseline market average—helps determine how markets are performing relative to historical activity. In February, the ZMR was 113.7, indicating a slightly overperforming market. The ZMR does not account for what it takes to sell a home; securing a sale may still feel difficult in a significantly overperforming market, according to Zonda.

On a metro level, 64% of the 50 markets analyzed by Zonda were overperforming in February, 22% were average, and 14% were underperforming.

National home prices decreased across entry-level, move-up, and high-end homes on a year-over-year basis in February. Entry-level prices fell 2.1% to $329,955, move-up prices fell 1.7% to $517,074, and high-end home prices fell 0.2% to $911,228. According to Zonda, the declines represent smaller home sizes, differing locations, and select price drops.

Zonda’s monthly survey of builders indicates 51% of respondents raised prices in February, up from 42% in January. A further 46% of builders reported holding prices flat, down from 54% in January. Incentives still remain a common tool for builder to help address affordability for buyers: 57% of new-home communities offered incentives in February, an increase compared to the previous month.

The count of actively-selling communities (14,516) increased 3.7% compared to February 2023, but slipped 2.2% on a month-over-month basis. Total community count is 24.3% below the same month in 2019. Zonda defines a community as anywhere where five or more units are for sale.

Salt Lake City (+13.1%), Orlando (+12.7%), and Austin (+12.6%) grew community count the most year over year, but community count in each was well below 2019 levels, according to Zonda. San Francisco (-19.3%), Philadelphia (-16.7%), and Cincinnati (-13.4%) experienced the largest declines in community count compared to 2023.

National quick move-ins (QMIs) totaled 26,726 in February, down 10.2% compared to February 2023 and down 9.1% compared to January levels. Despite the declines, QMIs are 193.6% above 2019 levels. QMIs remain a great option for many buyers due to the ongoing lack of resale supply; several builders have pivoted towards spec-heavy strategies to help increase QMI levels and capture demand for today’s home buyers.

Twenty-eight percent of Zonda’s select markets increased QMI count year over year, led by Cincinnati (+38.9%), Riverside/San Bernardino (+34.6%), and Houston (+11.4%). QMIs are lower than 2019 levels in Seattle (-72%), San Francisco (-60%), and New York (-55%).