Mortgage applications to buy new homes fell in May from both the previous month and last year as rising mortgage rates dampened demand, the Mortgage Bankers Association said Thursday.
Despite the decline, the MBA raised its estimate for the annual rate of single-family home sales for 2022.
According to the MBA’s Builder Application Survey (BAS) for May 2022, applications to purchase new homes fell 4% from April and 5% from May 2021. The data is not adjusted for typical seasonal patterns, the MBA said.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, said rising mortgage rates weren’t the only obstacle to new home sales.
“Activity was already constrained due to tight for-sale inventory, high sales prices, and extended building completion timelines,” he said
“After increasing for 15 consecutive months, the average loan size fell slightly from April’s survey high to $430,855, which is a potential indication that cooling demand may be starting to moderate price growth,” Kan said.
MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 727,000 units in May 2022, based on data from the BAS. That’s an increase of 3.7% from the April pace of 701,000 units, and the first increase in the estimate in five months.
On an unadjusted basis, MBA estimates that there were 61,000 new home sales in May 2022, a decrease of 6.2% from 65,000 new home sales in April.
The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.
By product type, conventional loans composed 75.8% of loan applications for new homes, FHA loans composed 13.6%, RHS/USDA loans composed 0.2% and VA loans composed 10.4%. The average loan size for new homes decreased from $436,576 in April to $430,855 in May, the MBA said.
The Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA provides an early estimate of new home sales volumes at the national, state, and metro level. The data also provides information regarding the types of loans used by new homebuyers.
Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.
The Census Bureau will release its report on new residential home sales for May on June 24.
