More than half of new home builders are responding to a slower market by offering average incentives of $10,169 to get buyers into a new home in September, according to Zonda’s New Home Pending Sales Index.
It’s easy to see why they are rolling out the incentives – pending sales for new homes are down 25% year-over-year. If you look back to 2019 things don’t look quite as stark – 2022 sales are down about 3 percent from September 2019 as buyers try to find a balance between higher prices and rocketing mortgage rates that are pushing uncomfortably high.
“We are on a quest to find what we’ll call the strike price – a price where consumers see the value in the home and/or community and re-enter the market,” said Ali Wolf, Zonda’s chief economist. “Right now, consumers are both uncomfortable with where prices are, and in many cases, unable to make the math work. Strategic price cuts and incentives are sometimes proving effective at pulling back in some of the skittish consumers.”
Incentives aren’t the only way builders are responding to lower sales. 81 percent of builders plan to slow things down for the rest of the year and 89 percent said they will also slow starts next year as well. Meanwhile, quick move-ins totalled 25,543 in September up 126.7 percent higher than last year and 10.4 percent higher than in 2019. These are homes that can be occupied within 90 days and are a sign of a shifting market.
The New Home Pending Sales Index, a leading residential real estate indicator based on the number of new home sales contracts signed across the country, came in at 113.2, representing a 25.9 percent decline from the same month last year. The index is currently 35 percent below cycle highs. On a month-over-month basis, seasonally adjusted new home sales increased 5.9 percent.
According to Zonda, national home prices increased on a year-over-year basis across entry-level, move-up, and high-end homes. Prices increased 12.7% for entry-level homes to $340,369, 10.8% for move-up homes to $529,050, and 8.7% for high-end homes to $906,157. While prices are up on a year-over-year basis, roughly 30% of builders across the country reported lowering prices month over month in September, according to Zonda.
For community count, or any project that has five or more units for sale, there are currently 13,383 actively selling communities, down 8.6% from last year. On a month-over-month basis, the national count of actively selling communities fell 1.4%. The total community count is 30.5% below its September 2019 level.
Like last month, the PSI was up in just one of our select markets year-over-year, Baltimore. Sales in the market were also up month-over-month. The metros that performed the worst year-over-year were San Francisco (-64.9 percent), Phoenix (-61.3 percent), and Sacramento (-54.1 percent). On a monthly basis, Minneapolis, Seattle, and Washington, DC were the best-performing markets. Minneapolis increased 22.3 percent relative to last month.
