The new-home market faced further challenges in March as the Iran conflict spurred consumer uncertainty and climbing interest rates, according to Zonda’s New Home Market Update (NHMU).
In March, new-home sales declined 7.2% compared to February. Zonda’s new-home metric shows there were 656,588 new homes sold in March on a seasonally adjusted annualized rate, a drop of 7.2% from a year ago. On a non-seasonally adjusted basis, 61,744 homes were sold, 7.4% lower than last year, but 10.9% above the same month in 2019.
“While the qualitative reviews were mixed, the hard data provided a clearer picture of the March market, with sales down 7% both month over month and year over year,” says Ali Wolf, the chief economist for Zonda and NewHomeSource.
“The decline in sales confirmed that the combination of lower confidence, rising borrowing costs, and diminished purchasing power cooled the market as the geopolitical situation intensified. Now all eyes are on how the April housing market will finish as the temporary ceasefire shot the S&P 500 to an all-time high and mortgage rates trended a bit lower.”
Zonda’s New Home Pending Sales Index (PSI), which accounts for fluctuations in supply by combining both total sales volume with the average sales rate per month per community, came in at 126.8 in March, representing a 9.8% decline from the same month last year. The index is currently 27.2% below cycle highs and on a month-over-month basis, seasonally adjusted new-home sales decreased 2.4%.
The markets that posted the strongest numbers relative to last year were Salt Lake City (+14.7%), Washington, D.C. (+6.8%), and San Francisco (+4.9%). Salt Lake City was up compared to last year despite falling 0.6% month over month.
National home prices increased 4.9% year over year for high-end homes but fell elsewhere. Prices were down 2.6% for entry-level to $319,979 and 0.3% for move-up to $515,594. Zonda says the rise in high-end home prices reflects new communities opening at higher price points, improvements in design quality, larger lots and home sizes, and/or better locations.
In March, 62% of new-home communities offered incentives on to-be-built homes and 79% on quick move-in supply. These are only publicly available incentives so will underrepresent overall usage, Zonda notes.
The Zonda Market Rating, which accounts for both sales pace and volume, indicates an “average” market nationally compared to historical performance. Among snapshot markets analyzed by Zonda, 28% were “overperforming,” 34% were “average,” and 38% were “underperforming.”
National quick move-ins (QMIs) totaled 32,332 in March, down 4.3% compared to last year and 7.1% lower month over month. Total QMIs are 71.3% above 2019 levels. For many consumers, QMIs provide a great alternative to resale supply given they are brand new and (often) come with builder incentives.
On a metro basis, 52% of Zonda’s select markets increased QMI count year over year. The markets that increased the most were San Francisco (+54.3%), Houston (+21.5%), and Philadelphia (+20.5%).
