Home sales aligned with expectations in October. While sales were cooler than September, the rate of sales was well above levels a year ago, according to the October New Home Market Update report from Zonda.

Zonda New Home Sales Market Update - a man and woman sign papers in the background; a mini house with keys sits in the foreground

Zonda’s new-home sales metric, which counts the number of new-home contract sales each month and accounts for cancellations and seasonality, shows there were 656,766 new homes sold in October. The number is down 2.1% month over month but 29.4% higher than October 2022 levels. On a nonseasonally adjusted basis, 52,466 homes were sold, which is 29.9% higher than last year and 0.5% above October 2019 levels. New-home sales volume is 11% below the recent peak seen in July.

According to Zonda, October’s performance is slightly better than historical norms for the month when accounting for seasonality.

“The story for the majority of October was that 8% interest rates were dampening demand as the ‘higher for longer’ economic narrative took hold,” says Ali Wolf, chief economist for Zonda. “Starting in November, a series of slower and/or improving economic data points, including the jobs report, stats on manufacturing, and inflation, have shifted the narrative again, allowing for a modest reprieve in mortgage rates.”

Zonda’s New Home Pending Sales Index—created to account for fluctuations in supply by combining total sales volume with the average sales rate per month per community—was 104.3, representing a 45.8% increase compared with October 2022 levels and a 1.6% decrease month over month. The index is 19.4% below cycle highs.

Phoenix (+168.5%), Sacramento, California (+139.1%), and Las Vegas (+115.5%) posted the strongest improvement on a year-over-year basis. While no markets posted year-over-year declines, the worst performing metros were Baltimore (+3.3%), New York (+6.4%), and Washington, D.C. (+10.6%). Month over month, Denver, Minneapolis, and Phoenix were the best performing metros.

The Zonda Market Ranking was created to add further context for metro level analysis. The ZMR accounts for sales pace and volume, is seasonally adjusted, and is taken as a percentage relative to a baseline market average. Markets are placed into performance groups ranging from “significantly underperforming” to “significantly overperforming.”

The National ZMR came in at 112.6 in October, indicating a slightly overperforming market. The metros overperforming their historical averages the most were Port St. Lucie, Florida; Fort Collins, Colorado; and Columbia, South Carolina. Only one market was significantly underperforming its historical average: Colorado Springs, Colorado. Salt Lake City; Austin, Texas; Seattle; San FranciscoPortlandOregonCape Coral, Florida; and New York were slightly underperforming.

Among the top 50 markets, 54% were overperforming, compared with 68% last month. Thirty percent of metros were average and 16% were underperforming in October, compared with 24% and 8% in September, respectively.

National home prices increased year over year for move-up and high-end homes but decreased by 0.1% for entry-level homes to $340,575. Move-up home prices increased 0.7% to $531,488 and 2.8% for high-end homes to $926,430.

Sixteen percent of builders reported raising prices in October, down from 30% in September. The percentage of builders reporting price increases has slowed as seasonality kicks in and builders are evaluating the affordability backdrop, according to Zonda. Incentives remain common in the housing market as a tool to help address affordability for buyers. Fifty-seven percent of new-home communities in the country were offering incentives in October, flat on a month-over-month basis.

There are 13,964 actively selling communities tracked by Zonda, up 0.9% from the same period in 2022. Total community count is 27.4% below the same month in 2019. Zonda defines a community as anywhere where five or more units are for sale. Austin (+18.1%), Minneapolis (+13.7%), and Orlando, Florida (+10.1%) grew community count the most year over year, while community count fell the most in Tampa, Florida (-15.0%), San Francisco (-14.5%), and Seattle (-11.8%).

National quick move-ins (QMIs)—homes that can be occupied within 90 days—totaled 28,748 in October, down 17.3% compared with October 2022 and down 2.7% compared with September. Total QMIs are 106.6% above 2019 levels. QMIs are still selling more quickly than they can be replaced in many markets as prospective buyers view the product type as an alternative to the resale market.

Zonda says it is tracking the trajectory of QMI inventory in the coming months to see if the pullback in demand starts to result in QMIs rising again, a similar pattern seen at the end of 2022. QMIs increased the most year over year in Salt Lake City (+41.3%), Cincinnati (+15.7%), and Las Vegas (+3.2%).

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