COSTA MESA, CA -- Today, Meyers Research released the New Home Pending Sales Index (PSI) for May 2020. The New Home PSI, backed by data from Zonda and Metrostudy, shows pending sales decreased year-over-year but rose 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 101.6 for May, representing a 5.2% decrease from May 2019. On a month-over-month basis, new home sales rose by 16.7% from April.
Pending new homes sales showed major differences by market, but all but one of the select 20 markets in the country posted a month-over-month increase. Sales in Seattle were down month-over-month and year-over-year due to three main reasons: tough comps from a strong May 2019 and April 2020, a higher-than-average unemployment rate, and a lower community count. New home communities in Seattle that cater to tech workers are still selling at a strong pace.
The best new home markets in May were concentrated in the South, led by Houston, Jacksonville, and Tampa. Houston is the standout market given the one-two punch of COVID-19 and depressed oil prices. Builders in the market, however, focused on pivoting their price to better cater to first-time buyers over the past 24 months and that bet has paid off.
"The housing market posted a substantial rebound in May that has carried on through June," said Wolf. "Low mortgage rates, pent-up demand, more flexibility of location due to the shift to work-from-home, and an elevated savings rate helping with the down payment all fueled new home purchases."
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 1.6% below the base level.
The next Meyers Research New Home PSI press release, featuring June 2020 data, will be issued on Thursday, July 22, 2020 at 9:00 a.m. ET.
Methodology
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.