What factors are contributing to the uncertainty in the market?
New home sales in the US continued their downward trend in February, marking an 11.6% drop year-over-year, according to the latest report from Zonda, a housing market data firm. The firm suggested this decline reflects growing affordability concerns, fluctuating economic conditions, and regional disparities in buyer confidence.
Zonda’s data, which covers 85% of the new home market, revealed that 666,568 new homes were sold on a seasonally adjusted annualized rate in February, a 1.9% decrease from the previous month. The firm’s New Home Pending Sales Index (PSI) also saw a 10.9% year-over-year decline, although sales increased slightly - by 1.7% - on a monthly basis.
“There are good days and bad days in today’s housing market,” said Ali Wolf, chief economist for Zonda and NewHomeSource. “Fluctuations in stock values, uncertainty about the labor market, and low housing affordability have consumers particularly concerned. For some, though, marriage and babies are a more powerful factor.”
Strategy to attract buyers
Despite the overall sales decline, performance varied based on geography, builder size, and buyer type. Larger builders continued to outperform smaller ones, while buyers in the Midwest were more optimistic compared to those in Florida. Additionally, higher-end buyers remained more resilient, though the long-term trend remains uncertain.
To attract buyers, homebuilders increasingly relied on incentives, with 56% of new home communities offering incentives on to-be-built homes and 74% on quick move-in homes. Nationally, these publicly advertised incentives averaged about 4% of local home prices. Incentives included mortgage rate buydowns, closing cost assistance, and design credits to boost affordability and desirability.
Regional trends
Certain metro areas bucked the national trend. Baltimore saw a 13.7% year-over-year increase in new home pending sales, while Salt Lake City and Cincinnati experienced moderate growth. Conversely, San Francisco (-43.5%), Denver (-32.3%), and Riverside/San Bernardino (-27.1%) posted the steepest declines.
New home PSI for select markets
|
Rank |
METRO |
SA MOM |
SA YOY |
|
1 |
Baltimore |
-6.90% |
13.70% |
|
2 |
Salt Lake City |
3.60% |
4.00% |
|
3 |
Cincinnati |
1.50% |
3.60% |
|
4 |
Jacksonville |
14.10% |
3.40% |
|
5 |
New York |
4.50% |
2.40% |
|
6 |
Minneapolis |
-3.90% |
0.10% |
|
7 |
Washington, DC |
-7.40% |
-5.00% |
|
8 |
Las Vegas |
-4.80% |
-6.10% |
|
9 |
San Antonio |
9.10% |
-6.60% |
|
10 |
Philadelphia |
11.10% |
-6.90% |
|
11 |
Phoenix |
13.90% |
-7.50% |
|
12 |
Houston |
-0.80% |
-10.90% |
|
13 |
Charlotte |
1.00% |
-11.80% |
|
14 |
Los Angeles/OC |
-2.70% |
-12.50% |
|
15 |
Dallas |
-1.50% |
-13.50% |
|
16 |
Orlando |
0.10% |
-13.50% |
|
17 |
Sacramento |
-14.40% |
-13.60% |
|
18 |
Tampa |
6.30% |
-15.70% |
|
19 |
Raleigh |
0.60% |
-16.30% |
|
20 |
Austin |
-5.70% |
-18.80% |
|
21 |
Atlanta |
-4.90% |
-21.50% |
|
22 |
Seattle |
-1.70% |
-21.60% |
|
23 |
Riverside/San Bernardino |
-2.80% |
-27.10% |
|
24 |
Denver |
2.60% |
-32.30% |
|
25 |
San Francisco |
-7.70% |
-43.50% |
Source: Zonda
Home prices remained relatively stable, with the entry-level segment averaging $329,229, while move-up and high-end homes saw a slight 0.7% increase, reaching $520,228 and $912,283, respectively. In February, 21% of builders lowered prices, while 61% kept them flat.
Inventory increased
The total number of actively selling new home communities increased by 5.7% from the previous year to 15,717, the highest level since early 2021. Quick move-in homes, which allow buyers to occupy properties within 90 days, grew 17.5% year-over-year but declined 8.2% from January.
What are your thoughts on the current market trends? Share your insights in the comments below.
