Zonda’s New Home Market Update posted a small monthly gain for the last month of 2022. Although a positive percentage is encouraging, the team at Zonda is still closely monitoring the risks related to changes in policy, the direction of the economy, housing affordability, and shifts in consumer confidence going further into 2023.

The New Home Pending Sales Index (PSI) for December came in at 95.3, representing a 39.9% decline from the same month in 2021. On a month-over-month basis, seasonally adjusted new-home sales increased 2.7%. The index is currently 45.3% below cycle highs.

The 2.7% monthly increase corresponded with a 7.5% month-over-month reduction in quick move-in inventory as builders offered incentives and price cuts to help sell any standing or soon-to-be-available homes.

“The leveling off of financing costs combined with builders ‘ripping the Band-Aid off’ regarding home prices and normal seasonality has allowed for green shoots in the housing market to start 2023,” says Ali Wolf, Zonda’s chief economist. “Price discovery is happening quickly in the new-home market, and housing demand in many metros across the country is showing signs of either stabilizing or improving compared to the second half of last year.”

The PSI failed to grow in any of Zonda's select markets in December, but Baltimore was again the strongest performer. On a monthly basis, Denver, Phoenix, and Salt Lake City were the best-performing markets, while Denver, Phoenix, and San Francisco were the metros that performed the worst year over year.

Zonda's new-home sales metric shows there were 424,535 new homes sold in December on a seasonally adjusted annualized rate. This was a decline of 19.6% from the prior month and a drop of 44% from the previous year. On a non-seasonally adjusted basis, 30,633 homes were sold, 47% lower than in 2021 and 36.6% below the same month in 2019.

National home prices increased year over year across entry-level, move-up, and high-end homes. Prices rose 9.6% for entry-level to $337,282, 8.9% for move-up to $526,445, and 7.7% for high-end homes to $902,905. Roughly 43% of home builders across the country reported lowering prices month over month in December.

Additionally, 57.2% of active projects are offering to-be-built incentives, up from last month. The average incentive dollar amount is $13,336 or 3.9% of the list price.

For community count, or any project that has five or more units for sale, there are 13,463 actively selling communities tracked by Zonda, down 7.2% year over year. On a month-over-month basis, the national figure slipped 2.1%. Total community count is 29.6% below the same month in 2019.

Phoenix, San Antonio, and Las Vegas have grown community count the most year over year, while the count has decreased the most in New York, Baltimore, and Atlanta. Eight percent of the select markets rose month over month, while 92% fell.

National quick move-ins (QMIs), or homes that can be occupied within 90 days, totaled 31,509, up 173% year over year but 7.5% lower month over month. The month-over-month drop in QMIs is reflective of builders offering price cuts and incentives to help move the inventory. Total QMIs are 47.9% above 2019 levels.

On a metro basis, all of Zonda's select markets increased QMI count year over year. The markets posting the biggest gains were Tampa, Florida; Phoenix; and Cincinnati. Jacksonville, Florida; Phoenix; and Las Vegas have seen the most growth in QMIs compared with the same time in 2019.