Mortgage applications for newly built homes declined in August for the fifth consecutive month, suggesting that affordability pressures are limiting demand even as builders continue to offer widespread sales incentives.
Applications decreased 5.5% from August 2025 and 6% from July on an unadjusted basis, according to the Mortgage Bankers Association’s Builder Application Survey.
“Increasing mortgage rates continue to put pressure on new home sales activity,” said Joel Kan, CMB, MBA’s vice president and deputy chief economist. “Applications to purchase newly constructed homes declined in August for the fifth straight month, with the level of applications down to its lowest in 2026.”
FHA Captures Larger Share
FHA loans accounted for 35% of new-home applications in August, up slightly from 34.6% in July. Conventional mortgages represented 49.5%, while VA loans accounted for 13.9% and USDA Rural Housing Service loans made up 1.7%.
“More homebuyers turned to FHA loans in response to higher mortgage rates,” Kan said.
The average loan amount decreased to $373,194 from $374,438 in July. The combination of a larger FHA share and a slightly smaller average loan points to continued payment sensitivity among new-home buyers.
For loan originators, the product mix reinforces the importance of comparing more than an advertised mortgage rate. Down payment requirements, mortgage insurance, seller concessions, cash needed at closing, and the duration of a builder-funded rate buydown can materially change the economics of a transaction.
Incentives Have Not Fully Offset Higher Rates
The slowdown occurred while builders continued using concessions to support sales. The National Association of Home Builders reported that 63% of builders offered sales incentives in August, while 35% reduced prices. Among builders cutting prices, the average reduction was 6%.
Those figures suggest incentives remain an important competitive tool, but they have not generated enough additional demand to prevent applications from declining.
Incentives may influence where a borrower obtains financing, particularly when access to a concession is tied to the builder’s preferred lender. Five consecutive monthly declines, however, indicate the larger constraint is the number of buyers able or willing to move forward at current rates and prices.
In July, new-home mortgage demand weakened despite widespread builder incentives. Separate housing data have also shown that slower new-home sales are giving buyers greater negotiating leverage.
MBA Estimates Monthly Sales-Pace Increase
MBA estimated that new single-family home sales ran at a seasonally adjusted annual rate of 664,000 units in August, up 2.6% from July’s 647,000 pace. The estimate remained 9% below its year-ago level.
On an unadjusted basis, MBA estimated 52,000 new homes were sold during August, down 3.7% from 54,000 in July.
The seasonally adjusted sales estimate and the unadjusted application decline measure the market differently and should not be read as contradictory. MBA derives its sales estimate using application data, assumptions about market coverage, and other factors. MBA’s survey tracks application volume from mortgage subsidiaries of home builders.
