Despite concerns that economic uncertainty following the collapse of Silicon Valley Bank would cause a pullback in home buyer demand, March was “another solid month” for the housing market, according to Zonda’s New Home Market Update report.
Home builders continue to benefit from low levels of inventory in the resale market at a time when demand for housing has increased. Additionally, competition from builders is limited as total community count is 28.9% below 2019 levels, allowing those firms with strong inventory positions to benefit with healthy sales activity.
“Home shoppers, frustrated by the lack of resale inventory and high prices, are pleasantly surprised by the options and offers available from the new-home side,” says Zonda chief economist Ali Wolf. “Quick move-in homes were viewed more of a liability when the demand pool retrenched at the end of last year but are more of an asset today as buyers look to move during the spring selling season.”
Zonda’s New Home Pending Sales Index (PSI) rose 1% month over month to a reading of 127.8. The PSI was created to help account for fluctuations in supply by combining total sales volume with the average sales rate per month per community. The March PSI is 13.1% lower than a year ago and is 26.6% below cycle highs.
Raleigh, North Carolina (+14.2%), Dallas (+11.9%), and Charlotte, North Carolina (+2.7%) posted the strongest year-over-year gains in the PSI, while New York (-35.7%), Salt Lake City (-30.5%), and Phoenix (-27.6%) posted the largest annual declines in March. Denver (+30.7%), Las Vegas (+25.8%), and Los Angeles/Orange County (+13%) reported the strongest monthly improvement in PSI in March.
Zonda’s new-home sales metric—which counts the number of new-home contract sales each month and accounts for cancellations and seasonality—decreased 3.4% month over month to a seasonally adjusted annualized rate of 625,974 in March. The count is 11.3% lower than March 2022. On a nonseasonally adjusted basis, 58,133 homes were sold in March, a 6.2% increase from February but 11.7% lower than March 2022.
According to the report, national home prices increased year over year across entry-level, move-up, and high-end homes, but at a decelerated pace. Entry-level prices rose 7.1% to an average price of $336,763; move-up prices increased 7% to $527,016; and high-end home prices rose 8% to an average of $912,375.
Zonda’s monthly survey indicates the majority of builders held prices flat month over month from February to March. Approximately 8% of builder respondents lowered prices, and 33% increased prices month over month.
Builders are continuing to offer incentives to help buyers given the lower levels of sales. More than 58% of active projects are offering to-be-built incentives, and the average incentive dollar amount is $12,833, or 2.5% of the list price, according to Zonda. Mortgage rate buydowns are increasingly popular among buyers to help lower monthly payments to address affordability concerns.
According to Zonda, there are 13,747 actively selling communities, down 1.4% from last year and 28.9% lower than the same month in 2019. Riverside/San Bernardino, California (+27.4%), Los Angeles (+15.1%), and Phoenix (+13.6%) grew community count—defined as anywhere with five or more units for sale—by the largest amount on a year-over-year basis. However, community count in each of the three metros remains below 2019 levels. Community count fell the most on a year-over-year basis in Baltimore (-17%), New York (-15.7%), and Tampa, Florida (-13.3%).
National quick move-ins (QMIs), defined as homes that can likely be occupied within 90 days, totaled 25,493 in March, up 180% compared with March 2022. The count is 13.4% lower on a month-over-month basis. On a metro basis, 96% of Zonda’s select markets increased QMI count year over year
Zonda says in many cases builders have been willing and able to offer more aggressive price cuts and/or incentives to help sell QMIs over the past six months, which is reflected in the month-over-month decrease in QMI inventory. QMIs have been preferred by some consumers looking to move immediately as inventory on the resale market continues to be constrained.
Phoenix (+739.8%), Jacksonville, Florida (+357.6%), and Raleigh (+323%) reported the largest increase in QMI inventory on a year-over-year basis. Jacksonville, Phoenix, and Sacramento, California, have experienced the most growth in QMIs compared with the same period in 2019, while QMIs have decreased by the largest amount in San Diego; San Jose, California; and Durham, North Carolina, compared with 2019.