Kicking off the year with sales topping January 2023’s numbers, Zonda’s New Home Market Update reports that nearly half the nation’s new-home markets were overperforming last month. As mortgage rates bounced between the high 6%s and low 7%s all month, builders still reported an increase in traffic in January, Zonda notes.
With limited resale inventory, the narrowing of the price spread between new and resale homes, the value proposition of a new home in the face of higher home prices and mortgage rates, and the use of incentives and buydowns to help address affordability challenges, builders have the advantage.
“Stability in mortgage rates is key for housing demand,” says Ali Wolf, chief economist with Zonda. “When house hunters start their search able to afford a home at one price, and just days later the parameters change because mortgage rates have moved, it causes confusion and frustration. Herein lies the benefit of buying a new home today given mortgage rate buydowns and extended rate locks.”
Zonda’s new-home sales metric, which counts the number of new-home contract sales each month and accounts for both cancellations and seasonality, shows there were 664,380 new homes sold in January on a seasonally adjusted annualized rate. While a decline of 1.6% from December, it is an increase of 11.7% from January 2023. On a nonseasonally adjusted basis, 55,257 homes were sold, 12.2% higher than last year and 2.1% below the same month in 2019.
Additionally, Zonda’s revised numbers show 674,000 new homes were sold in the full year of 2023, an increase of 12% from 2022.
The 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 128.8 in January, representing a 13.6% rise from the same month last year. The index is 26.1% below cycle highs. On a month-over-month basis, seasonally adjusted new-home sales decreased 1.2%.
Las Vegas (+68.6%), Phoenix (+51.6%), and Los Angeles/Orange County (+44.7%) posted the best numbers relative to last year. The large year-over-year percentages can be attributed to the pullback in 2022 and the slowness of early 2023. According to the PSI, San Francisco (-7.8%), Charlotte, North Carolina (-6.7%), and New York (-2.6%) declined year over year, but New York in addition to Las Vegas and Cincinnati performed best compared with December 2023.
The Zonda Market Ranking (ZMR), which accounts for both sales pace and volume, is seasonally adjusted, and is taken as a percentage relative to a baseline market average, outlines performance groups ranging from significantly underperforming to significantly overperforming. January’s National ZMR index came in at 103.7, an improvement from a slightly underperforming market last year.
Chicago; Fort Collins, Colorado; and Las Vegas were the major metros overperforming their historical averages in January, while San Francisco; San Jose, California; Reno, Nevada; Salt Lake City; and Portland, Oregon, were significantly underperforming. Seattle; Durham, North Carolina; Austin, Texas; and Orlando, Florida, were slightly underperforming, the ZMR points out. Among the top 50 markets, 46% were overperforming, 36% were average, and 18% were underperforming compared to 36%, 42%, and 22%, respectively, in December.
For national home prices on a monthly basis, entry-level prices fell 1.8% to $331,174 and 1.3% for move-up prices to $519,307. For high-end homes, prices increased 1% to $912,911. According to data and Zonda’s monthly survey, 42% of builders reported raising prices in January, up from 18% in December. Down from 71% in December, 54% reported holding prices flat.
Zonda notes that incentives are still common in today’s housing market to help address the affordability constraints for buyers. Of new-home communities across the country, 56% offered incentives in January, which is unchanged from the month prior.
For the 11th consecutive month, community count rose year over year at 14,409 actively selling communities tracked by Zonda. Up 4.2% from last year, the national figure did fall 1.7% compared with December. Total community count is 24.5% below January 2019. Zonda defines a community as anywhere where five or more units are for sale.
Year over year, Salt Lake City (+18.8%), Austin (+14.6%), and Orlando (+13.0%) grew community count the most. However, relative to 2019, community count was down 25%, 15%, and 30%, respectively. San Francisco (-19%), Philadelphia (-15.4%), and Baltimore (-12.8%) saw the largest community count declines. On a monthly basis, community count rose in 4% of select markets, remained flat in 4%, and fell in 92%.
Down 13.9% compared with January 2023 and 12.5% lower than December, national quick move-ins (QMIs) totaled 26,891. Zonda reports that total QMIs are 145.3% above 2019 levels. Across metros, 24% of Zonda’s select markets increased QMI count year over year with Riverside/San Bernardino, California (+28.6%), Las Vegas (+24.0%), and Cincinnati (+23.6%) leading the group.
Compared with the same time in 2019, Las Vegas (+212.2%), Cincinnati (+152.8%), and Phoenix (+143.7%) have seen the most growth in QMIs. QMIs are down the most compared with 2019 in Seattle (-66%), San Francisco (-62%), and Baltimore (-55%).
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