Zonda’s New Home Pending Sales Index for June 2022 finds the housing market cooling to levels seen in February 2020.
The New Home PSI posted a reading of 125.5 for June, down 7.5% YOY and 27.9% below cycle highs. It measures new home orders and average sales rate per community.
New home sales dropped month-over-month by 0.2%, the fifth straight month of declines.
The new home orders component fell 10.5% YOY, while the average sales rate per community component fell 8.2% YOY.
“Home sellers and home buyers are adjusting to a new reality in the housing market,” said Ali Wolf, Zonda’s chief economist.
“Home sellers are quickly understanding the days of frenzied demand are behind us and it takes an extra push to get buyers to close. Home buyers are reevaluating their finances given today’s home prices and higher interest rates. They are also weighing fears of a recession against an unrelenting desire to own a home.”
Zonda’s data indicates that 20 of 25 markets are being impacted by lack of supply. New home volume dropped to its lowest level since May 2020.
But as prospective buyers are pushed out of the market by increasing costs, inventory is beginning to correct. The number of available homes rebounded in June rising 2% across the country in the first annual inventory increase since 2019.
“The country’s economic woes have already cooled the housing market, and they’re likely to continue dampening demand,” said Redfin Chief Economist Daryl Fairweather.
“The Fed has signaled it may increase interest rates further to combat stubbornly high inflation, which could harm consumer confidence, and lower stock prices mean fewer prospective homebuyers can afford a down payment.”
Of the 25 markets analyzed, home sales were above June 2021 levels in five, with Minneapolis, Jacksonville, and Philadelphia at the very top. However, the rest fell below that line, including some of the strongest markets over the last two years.
Sacramento, Salt Lake City, and Denver all saw serious YOY declines, while Salt Lake City, San Antonio, and Phoenix had the largest month-over-month drops.