COSTA MESA, Calif.--(BUSINESS WIRE)--Today Meyers Research, the housing industry’s foremost advisors, launched the inaugural New Home Pending Sales Index (PSI) for October 2019. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales increased both year-over-year and month-over-month 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 119.0 for October, representing a 14.5% increase from October 2018. On a month-over-month basis, new home sales increased by 0.2% between September and October 2019.
“The US housing market regained momentum this year after a tough close to 2018,” said Ali Wolf, director of economic research at Meyers Research.“October’s new home sales capture stronger demand as lower mortgage rates, softer home price appreciation, and positive wage trends favor buyers.”
Seven of the ten key markets grew year-over-year and six of the ten increased month-over-month. Seattle, Phoenix, and Dallas experienced the most significant growth compared to last year, up 36.2%, 31.1%, and 24.0%, respectively.
Given the easy comp from the second half of 2018, looking at the two-year trend is very telling. The national index is 8.0% higher than October 2017. Phoenix, Dallas, and Houston show double-digit increases on a two-year basis. Phoenix, one of the worst-hit markets during the Great Recession, is at a cycle high.
Data revealed that the new home sales growth rate in Los Angeles moved in the positive direction for the first time since February of 2018. Sales in another California market, San Francisco, slowed in the second half of 2018 and is yet to fully recover. The market is trending in the right direction, though; sales were 0.4% lower year-over-year in October compared to down 7.3% in September.
When considering other factors occurring in the new home sales market Wolf observes, “Consumer confidence is the lifeblood of the housing market. Right now, we are seeing more shoppers encouraged by their employment situation and feel there’s value in buying a home today with rates sub-4.0%. As a result, the housing market in 2019 is expected to be the best of this expansion.”
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 19% above the base level.
The next Meyers Research New Home PSI press release, featuring November 2019 data, will be issued on Friday, December 20, 2019, 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 meyersresearchllc.com.
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