New home purchase market showing signs of fatigue?

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New home purchase market showing signs of fatigue?

New home purchase mortgage applications appear to be slowing down, according to the Mortgage Bankers Association (MBA)

Based on data from the MBA’s Builder Application Survey, the number of mortgage applications for new homes purchases dropped 4% month over month and was down 27.4% year over year on a seasonally unadjusted basis.

Joel Kan, associate vice president of economic and industry forecasting at MBA, said that the decrease is typical during summer when home sales start to moderate.

“Mortgage applications for new home purchases declined in July but did come in at the second-strongest July reading since the inception of MBA’s survey in 2012,” he said. “Furthermore, the average loan size again increased to a new record of $402,440. Homebuilders are still facing elevated building costs and accelerating home-price growth from the continued imbalance between supply and demand.”

Read more: Home purchase sentiment continues to turn sour

MBA estimates new single-family home sales were running at a seasonally adjusted annual pace of 779,000 units in July, up 10.7% from the June rate of 704,000 units. Unadjusted, there were 64,000 new home sales in July, a 3% drop from 66,000 new home sales in June.

“After adjusting for seasonal patterns, our estimate of annualized new home sales showed a jump of more than 10% from June,” Kan said. “The housing market is still extremely competitive, and prospective buyers have increasingly turned to newly built homes because for-sale inventories remain so low.”

By product type, conventional loans composed 73.8% of loan applications, FHA loans composed 14.6%, RHS/USDA loans composed 0.8%, and VA loans composed 10.8%. The average loan size of new homes increased from $392,370 in June to $402,440 in July.