Home sales remained largely flat and the new-home market remained challenged in February despite improved buyer enthusiasm and mortgage rates in the high 5% and low 6% range, according to Zonda’s New Home Market Update (NHMU). Community counts trended higher during the month while standing inventory also moved toward healthier levels at the start of the spring selling season.
Improved weather conditions and widely available buyer incentives also helped support the market, though the general economic outlook looks far different in mid-March than just a month ago.
“February trends already feel like old news,” says Ali Wolf, chief economist for Zonda. “Escalating geopolitical tensions, higher oil and gas prices, and mortgage rates moving back into the 6.29% to 6.41% range have quickly reshaped the narrative. While a core segment of home shoppers still want or need to buy today, others are slowing their search as they wait for greater stability.”
Zonda’s new-home metric indicated there were 694,552 new homes sold in February on a seasonally adjusted annualized rate, down 3.5% from January but up 2.6% from February 2024 levels. On a non-seasonally adjusted basis, 59,238 homes were sold in February, 2.2% higher than last year and 2% above the same month in 2019.
The Zonda New Home Pending Sales Index (PSI), which accounts for fluctuations in supply by combining total sales volume and the average sales rate per month per community, came in at a reading of 130.4 in February, a 3.8% decline from the same month a year ago. The markets that posted the strongest year-over-year gains in PSI were Washington, D.C. (+10.8%), Denver (+10%), and Cincinnati (+3%) while Seattle (-19.5%), Charlotte (-14.6%), and San Antonio (-14.3%) posted the largest annual declines.
National home prices increased 4.6% on a year-over-year basis for high-end homes, but were down 2.5% for entry-level and 0.6% for move-up homes. A supplemental Zonda survey indicates that 17% of builders lowered prices on a monthly basis in February, down from 20% in January. Approximately 61% of new-home communities offered incentives on to-be-built homes in February while 78% of quick move-in supply featured incentives.
The Zonda Market Rating, which accounts for both sales pace and volume, indicates an “average” market nationally compared to historical performance. Among snapshot markets analyzed by Zonda, 10% of markets were “overperforming,” 50% were “average,” and 40% were “underperforming.”
Community count ticked up 2.6% on a year-over-year basis in February but remains 9.2% below the same month in 2019. Zonda defines a community as anywhere five or more units are for sale.
National quick move-ins (QMI), homes that can likely be occupied within 90 days, totaled 32,123 in February, down 2.5% compared to last year. For many consumers, QMIs provide an alternative to resale supply given the similar move-in timeline with the added benefit of being new-construction with builder incentives. On a metro level, 56% of select markets analyzed by Zonda increased QMI count on a year-over-year basis. The markets with the largest increase in QMI were Philadelphia (+57.7%), Washington, D.C. (+42.2%), and San Francisco (+25.5%).
