The bright spot in the mortgage industry continues to be new home purchases. The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for July 2023 shows mortgage applications for new home purchases increased 35.5% compared from a year ago. Compared to June 2023, applications increased by 0.2%. This change does not include any adjustment for typical seasonal patterns.
“Applications for purchase loans on newly constructed homes remained strong in July, up 36% annually, as new homes continued to account for a growing share of homes available for sale,” said Joel Kan, MBA’s deputy chief economist. “The FHA share of purchase applications was 24.2%, the highest share since May 2020, and has increased in four of the last five months. 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.”
Not surprisingly, homebuilders are a happy bunch. Builder confidence improved in July to the highest level since last summer, the National Association of Home Builders reported. It was the seventh consecutive month that builder confidence has increased.
MBA estimates new single-family home sales, which have consistently been a leading indicator of the U.S. Census Bureau’s New Residential Sales report, were running at a seasonally adjusted annual rate of 677,000 units in July 2023. The new home sales estimate is derived using mortgage application information from the BAS and assumptions regarding market coverage and other factors.
The seasonally adjusted estimate for July is a decrease of 1.5% from the June pace of 687,000 units. On an unadjusted basis, MBA estimates that there were 56,000 new home sales in July 2023, a decrease of 6.7% from 60,000 new home sales in June.
By product type, conventional loans composed 65.3% of loan applications, FHA loans composed 24.2%, RHS/USDA loans composed 0.3%, and VA loans composed 10.2%. The average loan size for new homes decreased from $400,281 in June to $397,148 in July.
MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data and other sources, MBA can estimate new home sales volumes at the national, state, and metro levels early. This data also provides information regarding the types of loans new home buyers use.
Official new home sales estimates are conducted by the Census Bureau on a monthly basis. New home sales are recorded at contract signing in that data, typically coinciding with the mortgage application.
