Prospective buyers turn to newly built homes due to limited supply of existing houses
New home purchase activity continues to be a bright spot in a challenging housing market, thanks to an increase in annual applications, according to the Mortgage Bankers Association.
Mortgage applications for new home purchases were up 26.1% on a year-over-year basis in June, but down 5% from the previous month.
“Rising mortgage rates in June likely caused some pullback in purchases over the month, as the 30-year fixed rate averaged close to 6.8%,” said Joel Kan, MBA’s deputy chief economist. “However, applications for new home purchases have now shown annual increases for five consecutive months.”
In June, the average loan size of new homes fell to $400,281 from $403,581 in May. Conventional loans composed 65.5% of loan applications, FHA loans composed 24.1%, RHS/USDA loans composed 0.3%, and VA loans composed 10%.
Based on data from MBA’s Builder Application Survey, estimated new single-family home sales declined 9% month over month to a seasonally adjusted annual rate of 687,000 units. That’s below the May pace of 755,000 units.
On an unadjusted basis, there were 60,000 new home sales in June 2023, a 6.3% decrease from 64,000 new home sales in May.
“With existing inventory still held back by homeowners, prospective buyers have turned to newly built homes instead,” Kan said.
New housing starts slowed to an annualized rate of 1.43 million in June, but experts believe new home construction activity remained strong.
“Despite the decline, there are many factors that point towards the housing market moving into recovery as builder sentiment continues to improve,” said Kelly Mangold, principal at RCLCO Real Estate Consulting. “Demand for homes remains high from Millennials, though as Boomers move into their retirement years, many are moving and often have the benefit of significant home equity.”
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