Proving to be more resilient than initially thought, the new-home market in 2023 finished strong partly due to the lack of resale supply. Zonda’s New Home Market Update report reveals a monthly new-home sales gain of 1.6% in December and a 22.1% year-over-year increase.

Accounting for both cancellations and seasonality, Zonda’s metric shows there were 643,704 new homes sold in December on a seasonally adjusted annualized rate. On a nonseasonally adjusted basis, 48,046 homes were sold, 22.3% higher than 2022 and 0.6% below the same month in 2019.

New-home sales volume was 11% below the recent peak seen in July. Zonda’s preliminary numbers show 671,500 new homes were sold in the full year, an increase of 11% from 2022.

To keep up the pace, Zonda says going back to the basics will create success. “Throughout all of the housing turmoil of the past few years, the demographic backdrop hasn’t changed,” says Ali Wolf, Zonda’s chief economist.

“What has changed is the consumer mindset around the state of the market and housing affordability. The consensus forecast is that the 2024 housing market will be a bit better than 2023, but we need to work on educating consumers on the value of homeownership and help address the affordability strain.”

Zonda’s New Home Pending Sales Index (PSI)—created to account for fluctuations in supply by combining total sales volume with the average sales rate per month per community—came in at 126.4 in December, representing a 28.6% rise from the same month in 2022. The index is 27.4% below cycle highs. On a monthly basis, seasonally adjusted new-home sales increased 0.9%.

Low levels from 2022 created the strongest gains for Las Vegas (+119.3%), Phoenix (+98.9%), and Denver (+84.8%), which have since stabilized and were performing the best monthly. Only New York posted a year-over-year decline of -5.7%.

To add further context on the metro level, the Zonda Market Ranking (ZMR) was created to account for both sales pace and volume. It is seasonally adjusted and is taken as a percentage relative to the baseline market average. Based on the percentage above or below baseline, markets are bucketed into performance groups ranging from significantly underperforming to significantly overperforming relative to historical activity.

According to the ZMR, over one-third (36%) of new-home markets were overperforming in December with the national ZMR index coming in at 105.2, indicating an average market. In December, Port St. Lucie, Florida; Chicago; and Tampa, Florida, were overperforming their historical averages the most.

Among the top 50 markets, 42% were performing on average and 22% were underperforming. San Jose, California, and Portland, Oregon, were significantly underperforming, while Durham, North Carolina; Salt Lake City; Seattle; Austin, Texas; New York; Colorado Springs, Colorado; San Francisco; Orlando, Florida; and Richmond, Virginia, were slightly underperforming.

National home prices fell 1.2% for entry-level to $333,536 and 0.3% for move-up to $522,651 but rose 2.4% for high-end homes to $916,489. Supplementing its data with a survey Zonda conducts monthly, 18% of builders reported raising prices in December, up from 10% in November. Further, 71% reported holding prices flat, down from 75% the previous month.

Incentives are still common in today’s housing market to help address the affordability constraints for buyers, Zonda notes. Fifty-six percent of new-home communities across the country offered incentives in December, down slightly month over month. Many builders continue to find incentives necessary to help seal the deal with consumers.

Up 3.9% from the prior year, 14,197 actively selling communities were tracked by Zonda in December. On a month-over-month basis, the national figure slipped 1.9%. Total community count was 25.8% below the same month in 2019 and fell year over year in all of Zonda’s select markets. Zonda says the lack of competition from other new-home communities has allowed for some upward pressure on the average sales rate per month per community. Zonda defines a community as anywhere where five or more units are for sale.

Austin (+17.3%), Orlando (+15.2%), and Dallas (+11.1%) grew community count the most year over year. Relative to 2019, community count was down 13%, 27%, and 20%, respectively. The biggest community count declines were in San Francisco (-18.8%), Seattle (-13.3%), and Tampa (-11.5%).

Down 14.5% compared with last year and 8.8% lower month over month, national quick move-ins (QMIs) totaled 28,004. Total QMIs were 116.8% above 2019 levels.

Zonda reports that QMIs sell out quicker than they can be replaced in many markets as consumers view these homes as a great alternative to the resale market given the dearth of supply. The quick rise in QMIs last year led to price drops at many new-home communities, but the same buildup does not exist today.

Las Vegas; Jacksonville, Florida; and Riverside/San Bernardino, California, saw the most growth in QMIs in December compared with the same time in 2019, up 253.2%, 202.9%, and 135.5%, respectively. Year over year, Salt Lake City (+64.6%), Riverside/San Bernardino (+36.6%), and Cincinnati (+12.6%) grew the most. Compared with 2019, Baltimore (-65%), Seattle (-55%), and Atlanta (-47%) saw the largest decreases.