The headlines on the U.S. economy continue to be a mixed bag. While many economists believe a recession will rear its head in the next few months, many economic indicators remain stronger than experts expected.
Job growth has continued to exceed forecasts, auto sales are at a nearly two-year high, manufacturing is showing signs of stabilizing and new home sales are increasing despite high interest rates and high prices.
April was a banner month for new home sales, according to Zonda, a data company that tracks new home sales and production across the country. Zonda’s data revealed activity was up month-over-month, year-over-year and compared to 2019. This was the first time all three of the comparison points have been positive since March 2021.
Many believe the dire lack of resale inventory, the use of builder incentives and simple demographic tailwinds are behind the growth in new home sales despite higher mortgage rates.
“Over 70% of builders are telling us that current mortgage rates are their biggest hurdle when it comes to housing demand,” said Ali Wolf, Zonda’s chief economist. “Assuming we resolve the debt ceiling debacle, there are reasons to believe mortgage rates could come down over the next 12 months on economic uncertainty and a narrowing of the spread between the 10-year Treasury yield and 30-year fixed-rate mortgages, but for now, a substantial improvement is hope rather than reality.”
Zonda’s New Home Pending Sales Index (PSI) came in at 137.5, in April representing a 0.4% decline from the same month last year but a 1.7% seasonally adjusted month-over-month increase. Zonda’s PSI was created to help account for fluctuations in supply by combining both total sales volume with the average sales rate per month per community.
The index is currently 21.1% below cycle highs, but it shows a dramatic improvement from the sales index at the end of 2022.
New home pending sales index by metro rankings
The markets that posted the best numbers relative to last year were Dallas (+28.4%), Salt Lake City (+25.1%) and Raleigh (+15.8%).
The metros that performed the worst year-over-year were New York (-26.1%), Denver (-26.1%) and Phoenix (-16.6%).
The Twin Cities metro sits in the middle of the metro pack, posting a .6% year-over-year PSI increase.