New Home Sales Rise in August Due to More Supply, Zonda Reports

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The new home market saw a modest 2.1% month-over-month increase in total transactions in August, according to Zonda, Newport Beach, Calif.

This growth was supported by a 10.8% rise in new home inventory and coincided with many builders launching sales campaigns, Zonda noted in its September New Home Market Update. “In addition, sales continued to be supported by the widespread use of incentives and price cuts,” the report said.

The report noted a significant trend so far in September. “The recent decline in mortgage rates–staying below 6.5% for most of the month–represents a meaningful shift for the housing market,” Zonda said. “Although this may not feel like a major drop for those accustomed to 2% or 3% rates, even small reductions can have a major impact on affordability.”

Ali Wolf, Chief Economist for Zonda, noted moving from 7% to 6.5% mortgage rates puts 2.1 million more households in a position to buy. “If rates were to fall to 6%, that number more than doubles, pricing in another 4.2 million households,” she added. “While we don’t expect consumers to rush back to the market overnight due to lingering economic uncertainty, this is a clear step in the right direction.”

New home sales ticked up in August

Zonda’s new home sales metric counts the number of new home contract sales each month, accounting for both cancellations and seasonality. This metric shows there were 703,003 new homes sold in August on a seasonally adjusted annualized rate, a gain of 2.1% from July and a drop of 1.2% from a year ago.

Looking at pending sales, Zonda reported its August pending sales index came in at 137.1, representing a 3.8% decline from the same month last year. The index is currently 21.3% below cycle highs. On a month-over-month basis, seasonally adjusted new home sales increased 5.1%.

The markets that posted the best numbers relative to last year were Salt Lake City (+14.4%), Jacksonville (+5.8%), and Raleigh (+3.7%). Salt Lake City was up compared to the last year and grew 21.3% month-over-month.

Inversely, the metros that performed the worst year-over-year were Sacramento (-19.1%), Charlotte (-17.6%), and Tampa (-16.7%). On a monthly basis, Salt Lake City, Austin, and San Francisco were the best performing markets.