Mortgage Applications

Analyzing the Rise: Unveiling the Upward Trajectory of New Home Purchase Mortgage Applications

In a promising sign for the real estate market, the Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for July 2023 has revealed a substantial surge of 35.5 percent in mortgage applications for new home purchases compared to the same period a year ago. The momentum continues as the applications recorded a marginal uptick of 0.2 percent compared to June 2023. It’s worth noting that these figures have not been adjusted for the usual seasonal patterns, shedding light on a robust and authentic growth trend.

Resilience Amidst Opportunities: Unveiling the Landscape of New Home Purchase Mortgage Applications

Joel Kan, MBA’s Vice President and Deputy Chief Economist, elucidated on the data, stating, “Applications for purchase loans on newly constructed homes remained strong in July, up 36 percent annually, as new homes continued to account for a growing share of homes available for sale.” A notable highlight is the increasing share of Federal Housing Administration (FHA) purchase applications, which stood at 24.2 percent.

This marks the highest share observed since May 2020, signifying a trend shift. Kan further explained, “FHA purchase loans are a popular option for many first-time homebuyers and this increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions.”

Driving Insights: Estimating New Single-Family Home Sales

The MBA’s insights go beyond the application data. Their estimates regarding new single-family home sales, a reliable precursor to the U.S. Census Bureau’s New Residential Sales report, unveil a robust outlook. The seasonally adjusted annual rate of new single-family home sales in July 2023 is estimated to be at an impressive 677,000 units. These estimations are meticulously derived from comprehensive mortgage application information sourced from the BAS, coupled with thoughtful assumptions concerning market coverage and other pertinent factors.

However, the seasonally adjusted estimate for July does show a minor dip of 1.5 percent from the pace recorded in June, which stood at 687,000 units. A more granular, unadjusted view paints a similar picture. The MBA suggests that in terms of actual numbers, there were approximately 56,000 new home sales in July 2023. This indicates a slight decrease of 6.7 percent when compared to the 60,000 new home sales recorded in the preceding month of June.

Deciphering the Loan Landscape: Composition and Trends

A closer look at the loan composition brings forth intriguing insights. The distribution by product type reveals that conventional loans constituted a significant portion of loan applications, accounting for 65.3 percent. FHA loans, known for their popularity among first-time homebuyers, made up 24.2 percent of the applications. RHS/USDA loans and VA loans contributed 0.3 percent and 10.2 percent, respectively. A noteworthy shift is the change in the average loan size for new homes. July witnessed a decline, with the average loan size sliding from $400,281 in June to $397,148.

Mapping Trends: MBA’s Builder Application Survey

The MBA’s Builder Application Survey holds a pivotal role in tracking the pulse of application volume within the realm of home builders nationwide. Leveraging data from mortgage subsidiaries of home builders and supplementing it with inputs from various sources, the MBA adeptly provides an early estimate of new home sales volumes. This estimation extends to both national and localized levels, offering valuable insights to industry stakeholders. Moreover, the data gleaned also throws light on the preferences in loan types favored by new home buyers.

It’s important to note that the official estimates of new home sales are conducted by the Census Bureau on a monthly basis. This official data captures new home sales at the point of contract signing, which typically coincides with the mortgage application process.

In a dynamic real estate landscape, where the pursuit of homeownership remains an integral aspiration for many, the surge in new home purchase mortgage applications is an encouraging indicator. The robust growth recorded in July serves as a testament to the resilience of the housing market and the determination of prospective homeowners to turn their dreams of owning a new home into reality. As the real estate sector continues to evolve, the insights provided by the MBA‘s comprehensive analysis shed light on the trends shaping the path forward for both the industry and aspiring homeowners alike.

Mortgage Applications