September mortgage applications for new home purchases fell, with first-time buyers absorbing the heaviest rate impact
The new construction pipeline brokers were counting on has hit a six-year low. Rising mortgage rates pushed new home purchase applications down 8.3% year-over-year and 8% from August.
The Mortgage Bankers Association (MBA) estimated new single-family home sales at a seasonally adjusted annual rate of 584,000 units in September, the softest reading since April 2020, per the association’s Builder Application Survey (BAS).
On an unadjusted basis, the association estimated 47,000 transactions for the month, a 9.6% decline from 52,000 units recorded in August.
“The increase in mortgage rates in September had a chilling effect for new home purchase activity. Both mortgage applications and new home sales declined and fell further behind last year’s pace,” said Joel Kan, CMB, vice president and deputy chief economist at the Mortgage Bankers Association in Washington, DC.
The seasonally adjusted estimate represents a 12% drop from August’s pace of 664,000 units. That single-month swing reflects a measurable deterioration in deal flow heading into Q4 2026.
As new home sales activity through mid-2026 showed, even a brief monthly rebound earlier this year failed to close the year-over-year performance gap.
First-time buyers and the FHA pullback
September’s loan mix data points to a contraction in first-time buyer activity that brokers should track carefully. FHA loans — the primary financing vehicle for entry-level new home buyers — accounted for 34.7% of applications.
Conventional loans made up 50.2%, VA loans 14.1%, and RHS/USDA loans 1.0%.
Kan specifically noted that the FHA share declined in September, as higher mortgage rates imposed a disproportionate affordability burden on first-time purchasers.
Entry-level demand had already become fragile as 30-year fixed rates climbed toward their 2026 highs. September’s FHA data confirms that deterioration extended through the new construction channel.
The average loan size for new homes edged up to $374,724 in September from $373,194 in August, a modest increase that reflects a market where those still transacting tend to carry stronger purchasing power.
The pricing suggests the buyers holding in are generally better qualified, while price-sensitive borrowers have pulled back.
Research from Redfin found September pending home sales dropped to their lowest level in more than a decade, while a record share of home purchase agreements were canceled outside of the pandemic period. https://t.co/kScjszysAN
— Mortgage Professional America Magazine (@MPAMagazineUS) October 13, 2026
What brokers should watch next
MBA’s BAS functions as a leading indicator of the Census Bureau’s New Residential Sales report, with transactions recorded at contract signing, typically coinciding with the mortgage application. For brokers working builder channels, September’s data is an early read on the October Census release.
New home mortgage applications had risen sharply in mid-2025 on the back of FHA borrower growth and builder incentives. That tailwind has reversed.
With the FHA share shrinking and conventional loan volumes compressing under rate pressure, brokers positioning their new construction conversations through Q4 2026 will need to sharpen their product mix and affordability strategies.
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