Pending New Home Sales Jumped 32.7% Year-Over-Year According To Meyers Research
The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales increased month-over-month and year-over-year across the United States.
COSTA MESA, Calif., Aug. 21, 2020 /PRNewswire-PRWeb/ -- Today, the experts at Meyers Research, the housing industry's foremost advisors, released the New Home Pending Sales Index (PSI) for July 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales increased month-over-month and year-over-year across the United States. The index is a leading residential real estate indicator based on the number of new home sales contracts signed across the country.
The New Home PSI came in at 150.0 for July, representing a 32.7% increase from July 2019. On a month-over-month basis, new home sales rose by 5.3% from June. July's data highlights that the strength of the housing market is carrying on later in the year than the typical seasonality.
"The new home market has everything going for it right now including limited resale supply, fear of missing out, heightened dissatisfaction of our current living situation, low mortgage rates, months of saving money, and increased demand from key demographic cohorts," said Ali Wolf, chief economist at Meyers Research.
Pending new home sales trended above July 2019 levels in nearly every top market across the country. Activity in New York is still down year-over-year but has posted a month-over-month increase for the third consecutive month.
The best new home markets in July were Denver, Salt Lake City, and Raleigh. Each of these markets have resale inventory off between 35% and 55% compared to last year and rapidly rebounding economies. In Salt Lake City, for example, we calculate that the unemployment rate in July, which will be released later this month for local markets, could be as low as 5%. For reference, the national unemployment rate is roughly 10%.
"Builders are raising prices today to temper the demand," said Wolf. "The higher prices are not acting as a deterrent for buyers right now, but we are keeping our eyes on affordability challenges down the road."
New home data is susceptible to outsized swings in contract activity based on shifts in the number of actively selling communities. As a result, Meyers Research normalizes the data to ensure consistency across the index. The New Home PSI blends the cumulative sales of active or recently sold-out projects with the average sales rate per community, which adjusts for fluctuations in supply. Furthermore, the New Home PSI is seasonally adjusted based on each markets' specific seasonality and removes outliers. The index is baselined to 100 for June 2016. Today's national New Home PSI is 50% above the base level.
The next Meyers Research New Home PSI press release, featuring August 2020 data, will be issued on Tuesday, September 22, 2020 at 9:00 a.m. ET.
Methodology
The Meyers Research New Home Pending Sales Index (PSI) is built on proprietary, industry-leading data that covers 60% of the production new home market across the United States. Reported number of new home pending contracts are gathered and analyzed each month. Released on the 15th business day of each month, the New Home PSI is a leading indicator of housing demand compared to closings because it is based on the number of signed contracts at a new home community. Meyers Research monitors 18,000 active communities in the country and the homes tracked can be in any stage of construction.
The new home market represents roughly 10% of all transactions, allowing little movements in supply to cause outsized swings in market activity. As a result, the New Home PSI blends the cumulative sales of activity recently sold out projects with the average sales rate per community, which adjusts for fluctuations in supply. Furthermore, the New Home PSI is seasonally adjusted based on each markets' specific seasonality, removes outliers, and uses June 2016 as the base month. The foundation of the index is a monthly survey conducted by Meyers Research. It is necessary to monitor both new and existing home sales to establish an accurate picture of the relative health of the residential real estate market.
About Meyers Research
Meyers Research represents the housing industry's leading provider of rich data, backed by Zonda and Metrostudy, and the industry's top advisors for residential real estate development and new home construction. With products and services geared for homebuilders, multifamily developers, lenders, and financial institutions, we provide innovative solutions to maximize opportunities in today's real estate development landscape. To learn more, visit http://www.meyersresearchllc.com.
Meyers Research, Hanley Wood, Zonda, Metrostudy, and the company logo, are trademarks of Meyers Research, LLC and/or its subsidiaries.
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