Year-over-year, the Mortgage Bankers Association’s (MBA) Builder Application Survey (BAS) for June 2021 shows mortgage applications for new home purchases decreased 23.8% compared to June 2020. Note that last June, much of the country was under stay-in-place mandates due to the pandemic. Compared to May 2021, the MBA found that purchase applications decreased by 3%.
MBA estimates that new single-family home sales were running at a seasonally-adjusted annual rate of 704,000 units in June 2021, based on data from the BAS. The new home sales estimate is derived using mortgage app information from the BAS, as well as assumptions regarding market coverage and other factors.
"Homebuilders are encountering stronger headwinds of late, as severe price increases for key building materials, rising regulatory costs, and labor shortages impact their ability to raise production. This has dampened new home sales and quickened home-price growth," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "Additionally, still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers. Applications for new home purchases fell for the third consecutive month, while the average loan amount surged to another record high at $392,370. In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances."
The National Association of Home Builders (NAHB) recently estimated that changes in the price of softwood lumber products that occurred between April 17, 2020 and July 8, 2021 added $29,833 to the price of an average new single-family home, and $9,990 to the market value of an average new multifamily home.
The seasonally-adjusted estimate for mortgage applications for June is a decrease of 5% from May’s pace of 741,000 units. On an unadjusted basis, MBA estimates that there were 66,000 new home sales in June 2021, a decrease of 2.9% from 68,000 new home sales in May.
"Our estimate of new home sales in June dropped to its lowest annual pace since May 2020 at 704,000 units,” added Kan. “The average pace of sales has remained strong at around 738,000 for the past three months, but it is still around 7% lower than the average for 2020. Last year was the strongest year for new home sales in over a decade."
By product type, conventional loans composed 74.4% of loan applications, FHA loans composed 14.0%, RHS/USDA loans composed 1.0%, and VA loans composed 10.6%. The average loan size of new homes increased from $384,323 in May to $392,370 in June.