Historically low inventory levels continue to put downward pressure on pending new home sales, according to Zonda Economics Pending New Home Sales Index…(Zonda)
- M-O-M: The Pending New Home Sales Index fell 1.1% to 156.0 in February 2022.
- Y-O-Y: Pending new home sales saw an even bigger drop of 7.6% when compared to February 2021.
The Southeast seems to be experiencing the brunt of this housing shortage with 2 of the top 5 metros coming from the region. Baltimore was hit the worst with a 28.4% decline year-over-year followed by Raleigh (-25.2%), Cincinnati (-24.6%), Dallas (-24.3%), and Atlanta (-22.9%).
- It wasn’t a bad month for everyone despite the negative national index. San Antonio, TX saw a 16% jump year-over-year followed by New York City (+15.1%) and Seattle (+9.3%)
Ali Wolf, Chief Economist for Zonda, said rising rates are motivating more wannabe buyers instead of deterring them…
- “February marked another month defined by both home price and mortgage rate urgency. Home shoppers are still actively looking, but the supply-side is replete with challenges, which is limiting the total number of new home sales. For now, consumers are motivated by mortgage rates rather than deterred, but we need to recognize that won’t always be the case.”
As Wolf mentioned above this drop in new home sales has more to do with supply than with demand. Rising rates are not putting downward pressure on demand like many economists had projected just six months ago. That doesn’t mean it won’t happen though. Rates crossing the 5% barrier could be more impactful which could slow demand and allow the market to build its way to normalcy in time for a rate drop.