Unaffected by the banking crisis, new home sales remained solid in March 

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Zonda has released the New Home Market Update report for March 2023. 

There were concerns that the economic uncertainty following the collapse of Silicon Valley Bank might cause prospective homebuyers to pull back, but Zonda’s data captures that March was another solid month for the market. Zonda’s New Home Pending Sales index rose 1.0% month-over-month. 

Homebuilders are reaping the benefits of a dysfunctional housing market. New listings on the resale side have not risen enough to match the seasonal uptick in demand. Further, competition from other builders is limited as total community count is 28.9% below 2019 levels. The combined effect leaves buyers short of options and builders with inventory experiencing healthy sales activity. 

Not only do builders represent the ‘only game in town’ in some instances, but they are also often able to meet buyers where they are in terms of monthly payment. An increasing share of builders are offering incentives, especially mortgage rate buydowns, to help address today’s affordability constraints. 

“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,” said Ali Wolf, chief economist for Zonda. “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 sales metric counts the number of new home contract sales each month and accounts for both cancellations and seasonality. This metric shows there were 625,974 new homes sold in March on a seasonally adjusted annualized rate. This was a decline of 3.4% from last month and a drop of 11.3% from a year ago. On a non-seasonally adjusted basis, 58,133 homes were sold, up 6.2% from last month, but 11.7% lower than last year and 1.1% below the same month in 2019. 

Total sales volume is influenced by both supply and demand. Zonda’s New Home Pending Sales Index (PSI) was created to help account for fluctuations in supply by combining both total sales volume with the average sales rate per month per community. The March PSI came in at 127.8. This represents a 13.1% decline from the same month last year but a 1.0% seasonally adjusted month-over-month increase. The index is currently 26.6% below cycle highs. 

• • The markets that posted the best numbers relative to last year were Raleigh (+14.2%), Dallas (+11.9%), and Charlotte (+2.7%). 
• • The metros that performed the worst year-over-year were New York (-35.7%), Salt Lake City (-30.5%), and Phoenix (-27.6%). New York and Phoenix rose month-over-month, though. 
• • On a monthly basis, Denver, Las Vegas, and Los Angeles/OC were the best performing markets. Denver increased 30.7% relative to last month as the market showed a notable improvement from the weak sales at the end of last year. 

National home prices increased year-over-year across entry-level, move-up, and high-end homes. Prices rose 7.1% for entry-level to $336,763, 7.0% for move-up to $527,016, and 8.0% for high-end homes to $912,375. 

Supplementing our data with a monthly survey Zonda conducts, the majority of builders reported holding their prices flat month-over-month from February to March. Roughly 8% of builders lowered prices and 33% increased them. 

Incentives are still common in today’s housing market given the lower levels of sales. 58.3% of active projects are offering to-be-built incentives, up from last month. The average incentive dollar amount is $12,833 or 2.5% of the list price.