Phoenix Has Highest ‘Bottom-Tier’ Sales Rate On New Homes

By Mary Salmonsen | BUILDER Online

New-home sales are up by 35% YOY as of February—considering both the change in sales rate, which ties in supply and demand issues, and the change in total new-home orders.

Jacksonville has the highest YOY change in the Zonda New Home Pending Sales Index for large metros at 80%, followed by Chicago and Indianapolis. However, Jacksonville’s new-home orders are only up 32%, illustrating the impact of outsized demand and low supply.

Phoenix has the highest bottom tier sales rate by metro, meaning the highest concentration of homes sold in the bottom third of the new-home market’s price range. Las Vegas, Dallas, and Seattle also rank high on this list.

Las Vegas has the highest middle tier sales rate, followed by Riverside/San Bernardino, California, and Denver, while Riverside/San Bernardino has the highest sales rate in the top tier, followed by Las Vegas and Sacramento, California.

While home prices and interest rates have risen steadily over the course of many months, the new-home affordability ratios for the major home markets remain higher now than they were in January 2020. At the same time, households are better able to save for a down payment, thanks both to the economic stimulus checks and student loan deferrals.

Real-Time Housing Stats
According to Zonda senior managing principal Tim Sullivan, builders are now “pushing to the outskirts” to find new land to develop, led both by new geographic opportunities and work-from-home trends. Real estate agent commissions are falling, down to the 1.5% to 2% range, and builder teams have been “stretched thin” as some builders do not want to hire to match what might be temporary demand.

Sales are falling, largely by design. Of the builder respondents to Zonda’s latest survey, 89% reported that they have made some sort of adjustment to their sales strategy in order to buffer demand.

Only 8% reported an increase in cancellations month over month, while 98% of builders raised prices in mid-March compared with February. More than a quarter of respondents said they have increased base prices by over $10,000, and half reported that they are not achieving high enough appraisal values. Far and away, the greatest factor in raising base prices is lumber prices—70% of builders reported that this is the cause of their price increases.

This, among other factors, has pulled building cycles longer. Fifty-eight percent of builders still cited difficulty with government services, 44% reported issues with labor shortages, 85% reported supply disruptions, and 40% reported land disruptions.

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