New home purchase applications wane as rates rise

However, new home sales estimates are up for the first time in months

New home purchase applications wane as rates rise

Rising mortgage rates, which hit 5.78% last week, continued to dampen homebuyer demand, with applications for new home purchases falling 4% month over month in May.

Data from the Mortgage Bankers Association’s new survey revealed that new home purchase applications were down 4% from April and 5% below last year’s levels. The May reading does not include any adjustment for typical seasonal patterns.

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“Activity was already constrained due to tight for-sale inventory, high sales prices, and extended building completion timelines,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “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.”

MBA estimated that new home sales rose 4% to a 727,000-unit sales pace – the first increase in five months. Of the overall sales estimate, new single-family home sales were at a seasonally adjusted annual rate of 727,000 units in May.

By product type, conventional loans composed 75.8% of loan applications, FHA loans composed 13.6%, RHS/USDA loans composed 0.2% and VA loans composed 10.4%. The average loan size of new homes decreased from $436,576 in April to $430,855 in May.