Zonda has released its New Home Market Update report for February, revealing that the spring selling season has begun with a strong start.
The report indicates that many consumers who were previously on the sidelines have been enticed back to the market due to the attractive deals offered by home builders. In addition, some have come to terms with the reality that 3% mortgage rates are a thing of the past.
According to Zonda's new-home sales metric, sales activity was up 2.2% month over month in February, following a strong January. The report notes that some of the hardest-hit markets in the Western U.S. are showing notable improvements, while sales in the East range from stable to strong.
"Housing demand showed real-time sensitivity to mortgage rates as they rose throughout February, with many builders reporting stronger demand in the former part of the month compared to the latter," says Ali Wolf, chief economist for Zonda. "The collapse of Silicon Valley Bank and Signature Bank sent mortgage rates back down, though, as investors piled money into government bonds. The new question is—will consumers continue to celebrate the downward move in mortgage rates, or will broader economic concerns push them back to the sidelines?"
Zonda's new-home sales metric counts the number of new-home contract sales each month and accounts for both cancellations and seasonality. In February, there were 626,627 new homes sold on a seasonally adjusted annualized rate, representing an 18.3% drop from a year ago.
On a non-seasonally adjusted basis, 52,698 homes were sold, which is 18.6% lower than a year ago and 9.3% higher than in February 2019.
Zonda's New Home Pending Sales Index (PSI)—created to help account for fluctuations in supply by combining both total sales volume with the average sales rate per month per community—came in at 117.7 for February. This represents a 24.9% decline from February 2022 but up 4.6% compared with January. The index is 32.4% below cycle highs.
The only market that grew relative to last year was Charlotte, North Carolina (+6.9%), while the metros that performed the worst year over year were San Francisco (-51%), Salt Lake City (-45.7%), and Sacramento, California (-41.3%).
Month over month, Denver, Phoenix, and Salt Lake City—some of the markets that were hit hardest in early 2022—were the best performing in February. Denver increased 38.5% compared with January.
The report notes that home prices are up year over year for entry-level, move-up, and high-end product—but at a decelerated pace. National home prices increased by 7% for entry-level to $336,364, 7.1% for move-up to $527,226, and 7.8% for high-end homes to $909,644.
The majority of builders reported holding their prices flat month over month from January to February, according to Zonda's monthly home builder survey. Roughly 22% of builders reported lowering prices, while 22% said they increased them.
Incentives are still common in today's housing market given the lower levels of sales; 57.8% of active projects are offering to-be-built incentives, up slightly from last month. The average incentive dollar amount is $13,258, or 2.6% of the list price.
For community count, or any project that has five or more units for sale, there are 13,559 actively selling communities tracked by Zonda, down 4.1% year over year. On a month-over-month basis, the national figure slipped 2%. Total community count is 29.3% below the same month in 2019.
Riverside/San Bernardino, California; Phoenix; and Los Angeles have grown community count the most year over year, while the count has decreased the most in Baltimore, New York, and Atlanta. None of the select markets saw community count increases month over month— 96% fell and 4% were flat.
National quick move-ins (QMIs), or homes that can be occupied within 90 days, totaled 27,752, up 225.6% compared with last year but 13.9% lower month over month. Total QMIs are 40.4% above 2019 levels.
In many cases, according to Zonda, builders have been willing and able to offer more aggressive price cuts and/or incentives to help sell QMIs over the past few months, and the month-over-month drop captures the effectiveness. Further, QMIs have been preferred by some consumers looking to move now as inventory on the resale market remains constrained.
According to Zonda's monthly survey of builders, nearly 60% reported being either comfortable or somewhat comfortable with their QMI levels, while the remainder said they were uncomfortable or somewhat uncomfortable.
On a metro basis, all of Zonda's select markets increased QMI count year over year. The markets posting the biggest year-over-year gains were Phoenix; Tampa, Florida; and Raleigh, North Carolina.
