The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for May 2021 shows mortgage applications for new home purchases decreased 5.9% compared to one year ago. Compared to April 2021, applications decreased by 9% month-over-month.
"Mortgage applications to purchase a new home decreased in May for the second straight month, while the average loan size, at $384,000, increased for the fourth consecutive month and reached a new survey high," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "Loan balances continue to rise because of a larger share of sales in the higher end of the market, as well as increased sales prices from strong demand and elevated building material costs."
Sales in the luxury market continue to rise, as those who were able to stash away savings during the pandemic are seeking larger, luxury homes. A recent Redfin study has found that purchases of high-end and luxury homes jumped 26% year-over-year during the three months ending April 30—compared to a 17.8% gain in purchases of affordable homes, and a 14.8% increase in the purchases of mid-priced homes.
"MBA's estimate of new home sales showed that the seasonally adjusted annualized pace of sales dropped 4% in May,” said Kan. “Since reaching a survey-high 927,000 units in October 2020, the annual pace of new home sales has now fallen around 20%, weighed down by low housing inventory and rising prices."
The low inventory Kan cites was another record low according to Redfin in May, as the number of homes available for sale fell 27% from May 2020, with the typical home selling in just 16 days in May 2021.
MBA estimates that new single-family home sales were running at a seasonally-adjusted annual rate of 741,000 units in May 2021. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally-adjusted estimate for May is a decrease of 3.8% from the April 2021 pace of 770,000 units. On an unadjusted basis, MBA estimates that there were 68,000 new home sales in May 2021, a decrease of 5.6% from 72,000 new home sales in April.
On Wednesday, the U.S. Census Bureau and the U.S. Department of Housing & Urban Development (HUD) announced their new residential construction statistics for May 2021, which found that privately‐owned housing starts in May at a seasonally-adjusted annual rate of 1,572,000, 3.6% above the revised April 2021 estimate of 1,517,000, and 50.3% above the May 2020 rate of 1,046,000. Single‐family housing starts in May were at a rate of 1,098,000, which was 4.2% above the revised April figure of 1,054,000.
“With brisk house price appreciation and a continued lack of existing home sale listings, demand for new construction remains robust,” said Doug Duncan, Chief Economist at Fannie Mae. “However, homebuilders continue to face supply constraints, namely shortages of building materials, labor, and buildable lots. Despite single-family starts trending modestly downward in recent months, the total number of homes under construction moved up 1.2% in May, the 12th consecutive monthly increase and its highest level since 2007. This divergence likely reflects in part a longer timeline for construction due to supply disruptions. However, with lumber prices falling in recent weeks and a strong backlog of homes sold-but-not-yet-started, we expect some upward movement in single-family starts in the coming months as delayed and put-off projects are initiated.”