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<\/a>On a national level, January and February active listings were at their highest levels since 2020, but inventory remained 40% lower than pre-pandemic levels in 2019. On a metro level, Florida\u2019s Orlando, Jacksonville<\/a>, and Tampa; San Antonio; Denver<\/a>; and Houston have seen the biggest year-over-year increases in resale inventory.<\/p>\n\n\n\n \u201cOne of the issues in the market has been that existing homeowners feel there is nowhere else for them to move,\u201d Wolf said during the webinar. \u201cIn some of these markets, they feel a little less stuck because there is more competition and optionality.\u201d<\/p>\n\n\n\n Wolf said the increase in inventory, particularly in metros in Texas and Florida, has not resulted in comparatively poor performance in the new-home market. According to the Zonda Market Ranking\u2014which accounts for both sales pace and volume, is seasonally adjusted, and is taken as a percentage relative to a baseline market average\u2014the new-home sector in most markets in Florida<\/a> and Texas is performing at the same level as last year or better than last year.<\/p>\n\n\n\n \u201cIs more inventory good or bad [for] the new-home market? We think the idea of inventory being bad comes with an increase in investors selling their home or an increase in distressed homeowners needing to sell their home,\u201d Wolf said. \u201cBut we look at more inventory oftentimes as good, because of more competition and more mobility.\u201d<\/p>\n\n\n\n Using the new-home share of single-family inventory as a backdrop, Wolf explored the potential impact of significant increases in resale inventory. Increases of active listings of 40% or 50%, the share of new homes in the overall market would only dip between 25% and 30%.<\/p>\n\n\n\n \u201cEven with a 50% increase in resale inventory, we would still find that the new-home share of the overall market would be elevated compared to what we\u2019ve seen historically,\u201d Wolf said. \u201cResale will impact dynamics [of the market], but that makes me feel a little more comfortable with the trajectory the new-home market is on.\u201d<\/p>\n\n\n\n Sullivan identified land as an important area to watch in the new-home market. Total community count is 24.5% lower than the same month in 2019, and, on a metro level, areas such as New York<\/a>, Washington, D.C<\/a>., Philadelphia<\/a>, Atlanta<\/a>, Los Angeles<\/a>, Tampa, and Baltimore<\/a> have community counts more than 40% lower than in 2019.<\/p>\n\n\n\n \u201cWe have been burning [through] our communities faster than we can bring them to the market,\u201d Sullivan said during the webinar. \u201cThat is an issue and one of things pushing pricing. [Community count] is a challenge we do worry about, because we need the supply in reasonably priced communities.\u201d<\/p>\n\n\n\n Amid a shortage of buildable lots, around half of builders surveyed by Zonda are reporting moving \u201cfull steam ahead\u201d on land deals, while approximately 46% are moving cautiously with their land strategy. Additionally, nearly half of builders are reporting land prices are moving higher compared with a few months ago, a significantly higher share than in recent Zonda monthly surveys.<\/p>\n\n\n\n Zonda\u2019s most recent New Home Lot Supply Index reading was higher than 2022 levels but declined at the end of 2023, suggesting a tightening lot supply as builders plan to ramp up construction activities. With a majority of builders planning to initiate more projects, the demand for lots is expected to increase, which could have knock-on effects on affordability due to lot pricing dynamics.<\/p>\n\n\n\n \u201cThere\u2019s the implication that there could be a slowdown in terms of bringing lots to market, which puts another upward pressure on lot prices,\u201d Sullivan noted.<\/p>\n\n\n\n According to Zonda data, 46% of builders took no price increases in February, while 44% increased base prices between $1,000 and $5,000.<\/p>\n\n\n\n \u201c[Prices] haven\u2019t spiked, but they\u2019ve moved up a little bit, and there\u2019s a fewer number of builders that are keeping prices flat [compared with January],\u201d Sullivan said. \u201cWe are seeing prices move up, but they are moving up gently.\u201d<\/p>\n\n\n\n As a result of affordability challenges, the average sales rate per month per community of entry-level homes has experienced the slowest growth level of housing types, according to Wolf. While the move-up market has experienced a 40% improvement in sales pace relative to itself since before the pandemic and the luxury market has improved 35% relative to itself, entry-level sales rates have only improved 20% compared with pre-pandemic levels.<\/p>\n\n\n\n The typical entry-level price point, between $200,000 and $300,000, has seen its share of total contracts in the housing market decline from 25% in 2018 to less than 10% in the current housing market. The share of contracts for homes priced between $400,000 and $750,000 has increased to 80% form 60% in 2018.<\/p>\n\n\n\n \u201cA lot of the areas across the country that have been traditionally affordable and attainable have gone up in price,\u201d Wolf said.<\/p>\n\n\n\n In response to challenging affordability conditions, many builders are reporting offering smaller homes. According to a Zonda survey, 46% of builders are planning to build smaller homes to lower costs and sales prices. Builders are also reporting starting more spec homes to manage cycle times and costs, paring back features, building on smaller lots, and pursuing land deals farther from \u201curban core\u201d areas to help lower costs and sale prices.<\/p>\n\n\n\n During the webinar, Wolf shared Zonda\u2019s economic projections for 2024 along with an estimated probability of occurrence. Overall, Zonda projects there is a 75% chance the Federal Reserve cuts short-term rates twice in 2024, though the cuts are unlikely to occur before the summer months. Additionally, Zonda anticipates it is highly likely mortgage rates will end the year below the 2023 full-year average of 6.81%, driven by a narrowing of the spread between the 10-year treasury and the 30-year fixed-rate mortgage. However, given potential \u201ccracks\u201d in the economy, Zonda forecasts a recession is more likely to occur in 2024. Wolf said there is a 60% chance there will be a recession in the calendar year.<\/p>\n\n\n\nHousing Supply, Land, and Prices<\/strong><\/h3>\n\n\n\n
Affordability and Smaller Homes<\/strong><\/h3>\n\n\n\n
Economic Forecast<\/strong><\/h3>\n\n\n\n