COSTA MESA, CA -- The experts at Meyers Research recently released the New Home Pending Sales Index (PSI) for January 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales increased year-over-year and month-over-month across the U.S. 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 118.4 for January 2020, representing a 13.1% increase from January 2019. On a month-over-month basis, new home sales increased by 0.8% between December 2019 and January 2020.
“We’ve entered peak home buying season and reduced mortgage rates have hit at the perfect time,” said Ali Wolf, director of economic research at Meyers Research. “Today’s mortgage rates are telling consumers to take advantage and all signs point to them listening.”
Nine of the 10 key markets grew year over year. San Francisco, CA, Los Angeles, CA, and Denver, CO, experienced the most significant growth compared to last year, up 37.8%, 36.9%, and 35.4%, respectively. Half of the markets grew on a month-over-month basis, led by Los Angeles, CA.
Given the easy comp from the slowdown in late 2018 and early 2019, looking at the two-year trend is very telling. The national index is 3.6% higher than January 2018. Spring selling season in 2019 returned to normal levels of volume so the need to review the data on a two-year basis will only apply to new home sales for the next couple of months.
New home pending sales in Phoenix, AZ, are up a strong 16% compared to two years ago, which highlights the current strength of the market. On a per community basis, builders are hitting the highest rate since the index’s inception. Total new home volume in Phoenix is within 3% of the market’s cycle high. The two-year growth rate in new home sales also highlights considerable strength in Houston, TX, Dallas, TX, and Denver, CO.
The strong annual clip for Los Angeles and San Francisco in California is less robust when put in context. Both markets are lower compared to two years ago, with Los Angeles sales 19.3% below January 2018 and San Francisco down 24.3%.
“The new home data captures the underlying strength of today’s housing market,” said Wolf. “January’s read was the best so far this cycle as consumers brush off the election and Coronavirus woes and focus on the opportunities in today's housing market.”
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 18.4% above the base level.
The next Meyers Research New Home PSI press release, featuring February 2020 data, will be issued on Friday, March 20, 2020, at 9 a.m. ET.