COVID-19’s impact on the housing became apparent in March with pending new home sales down 33% month-over-month
COSTA MESA, Calif., April 21, 2020 — Today, the experts at Meyers Research, the housing industry’s foremost advisors, released the New Home Pending Sales Index (PSI) for March 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales decreased 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 82.1 for March, representing a 23.9% decrease from March 2019. On a month-over-month basis, new home sales fell by 33.1% between February and March 2020.
“March is historically a better month than February for new home sales but COVID-19 turned that trend on its head, in part because of record-breaking job losses,” said Ali Wolf, chief economist at Meyers Research. “Uncertainty and fear are powerful forces.”
Pending new homes sales posted a drop on a year-over-year and month-over-month basis for all of the select markets. Given the reversal in trend mid-spring selling season, looking at the month-over-month change is more valuable today.
Houston, San Francisco, and Los Angeles posted the largest drops month-over-month in pending new home sales. The trend in Houston is unsurprising as the local housing market deals with the one-two punch of COVID-19 and a battered energy sector. The California Governor, Gavin Newsom, was the first to announce that his state would go under shelter-in-place orders on March 19th. The accompanying unease around the announcement as well as confusion about what activities could continue contributed to the larger than average drops in San Francisco and Los Angeles.
“The housing market is dependent on the labor market, and today, the number of Americans that are furloughed or permanently laid off are at record levels,” said Wolf. “Even still, we are finding builders are pleasantly surprised to learn that homes sales are still happening, just at a far slower pace.”
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 17.9% below the base level.
The next Meyers Research New Home PSI press release, featuring March 2020 data, will be issued on Thursday, May 21, 2020 at 9:00 a.m. ET.
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.