Homebuilding headwinds slow new home purchase mortgage applications

They are down for the third straight month

Homebuilding headwinds slow new home purchase mortgage applications

Stronger headwinds, such as severe price hikes, rising regulatory costs, and labor shortages, continued to hinder homebuilders’ ability to raise production in June, according to the Mortgage Bankers Association.

Data from MBA’s new survey revealed that mortgage applications for new home purchases fell 23.8% from a year ago. Month over month, applications dropped by 3% on a seasonally unadjusted basis.

Joel Kan, associate vice president of economic and industry forecasting at MBA, said that the challenges homebuilders face have dampened new homes sales and quickened home-price growth.

“Additionally, still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers,” Kan added. “Applications for new home purchases fell for the third consecutive month, while the average loan amount surged to another record high at $392,370. In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances.”

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MBA estimated that new single-family home sales in June plummeted to their lowest annual pace since May 2020 at 704,000 units. This is down 5% from the May pace of 741,000 units. On an unadjusted basis, MBA estimates that new home sales were running at a 66,000 rate in June, down 2.9% from 68,000 new home sales in May.

“The average pace of sales has remained strong at around 738,000 for the past three months, but it is still around 7% lower than the average for 2020,” Kan said. “Last year was the strongest year for new home sales in over a decade.”

By product type, conventional loans made up 74.4% of loan applications, FHA loans composed 14%, RHS/USDA loans composed 1% and VA loans composed 10.6%. The average loan size of new homes increased from $384,323 in May to $392,370 in June.

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