In July, the new-home market was challenging for builders, according to Zonda’s New Home Market Update (NHMU). Despite home builders’ ongoing efforts to increase demand through incentives and pricing adjustments, new-home sales declined 1.4% compared to June and 1.1% year over year.
Zonda’s new-home metric shows there were 690,958 new homes sold in July on a seasonally adjusted annualized rate, which is a 1.4% decline from June and 1.1% decline from last year. On a non-seasonally adjusted basis, 58,063 homes were sold, 0.7% lower than last year and 8.9% above the same month in 2019.
“The housing market remains in wait-and-see mode,” says Ali Wolf, chief economist for Zonda and NewHomeSource. “Consumers still want to buy homes, but uncertainty is making them more cautious. Mortgage rate volatility, geopolitical tensions, the approaching midterm elections, and concerns about AI’s impact on the labor market continue to weigh on confidence. Until affordability improves or confidence returns, the market is likely to keep treading water.”
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, was 131.9 in July, representing a 0.9% fall from the same month last year. The index is currently 24.3% below cycle highs and on a month-over-month basis, seasonally adjusted new-home sales were flat.
The markets that posted the best numbers relative to last year were New York (+19.1%), Minneapolis (+18.2%), and Austin (+14.3%). New York was up compared to last year but fell 8.6% month over month, Zonda says.
National home prices climbed 2.6% year over year for high-end homes to $945,470 but fell 2.4% for entry-level homes to $317,715 and 0.6% for move-up homes to $515,192. Zonda says the increase among higher-priced homes reflects a concentration of new communities opening at premium price points, along with larger homesites, bigger floor plans, and more desirable locations.
For July, 63% of new-home communities offered incentives on to-be-built homes and 81% 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. Across Zonda’s top 55 major markets, 13% were “overperforming,” 36% were “average,” and 51% were “underperforming.”
National quick move-ins (QMIs) totaled 36,033 in July, down 9.9% compared to last year and 0.5% lower month over month. Over the past 18 months, builders have taken a more measured approach to spec home construction to avoid adding excess inventory amid a more challenging sales environment, Zonda says. Total QMIs are 63.8% above 2019 levels.
On a metro basis, 36% of Zonda’s select markets increased QMI count year over year. The markets that grew the most year over year were San Francisco (+54.5%), Cincinnati (+41.4%), and Philadelphia (+27.5%). Compared to the same time in 2019, Cincinnati, Las Vegas, and Riverside/San Bernardino have seen the most growth in QMIs, up 379.3%, 231.1%, and 179.4%, respectively.
