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Apps for New Home Purchases Dip 15.2% YoY in October

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for October 2021 has found that applications for new home purchases decreased 15.2% year-over-year, yet rose 6% over September 2021.

"Applications for new home purchases in October were down 15% from a year ago, but activity was 6% higher than in September,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. “The strong monthly gain puts MBA's estimate of new home sales at its strongest pace since January 2021.”

The MBA estimates that new single-family home sales were running at a seasonally adjusted annual rate of 897,000 units in October 2021, based on data from the BAS—which tracks application volume from mortgage subsidiaries of home builders across the country. MBA’s estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

As supply and demand imbalances continue to cause issues for prospective buyers, CoreLogic’s recently issued Home Price Index (HPI) and HPI Forecast found that the demand for the short supply of homes listed remained solid through the end of the summer, driving prices upward 18% year-over-year in September.

“Purchase activity continues to be dominated by higher loan balance transactions, which pushed the average new home loan size up to over $412,000, another new record in the survey,” said Kan. “Recent U.S. Census data show an increasing share of new sales are for homes yet to be built or still under construction, and a shrinking share of completed homes. Housing demand remains strong, and buyers are making quick decisions in a still very competitive market."

U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) findings on new privately‐owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,650,000, 4% above September’s rate, and 3.4% above the October 2020 rate of 1,595,000. HUD and Census Bureau reported that single‐family authorizations in October were at a rate of 1,069,000, 2.7% above the revised September figure of 1,041,000.

“While groundbreaking on new home homes slowed in October, housing permits–a leading indicator of future starts—increased to an annual pace of 1.65 million, which is a good sign that home building is beginning to accelerate to keep up with the pace of household formation,” said Odeta Kushi, First American Deputy Chief Economist. “Single-family permits, while still down from pandemic highs, are nearly 6% higher than pre-pandemic (February 2020). Yet the number of single-family homes permitted, but not started increased this month and is 43% higher compared with one year ago, at tell-tale sign of ongoing supply chain issues.”

The MBA reports that the seasonally adjusted estimate for October is an increase of 6.4% from the September pace of 843,000 units. On an unadjusted basis, MBA estimates that there were 68,000 new home sales in October 2021, an increase of 3% from 66,000 new home sales in September.

"Homebuilders still face delays and challenges from supply-chain bottlenecks and rising costs,” said Kan. “Overall construction costs, as measured by the Producer Price Index (PPI), recorded an annual increase of 12.3% in October, which is almost five times the average annual change."

As Kan noted, builders continue to factor rising costs and prices as they manage their pipelines to account for supply chain issues, which are being passed on to buyers. Redfin recently reported that the median price of homes sold in October 2021 was $378,700, up 13% year-over-year.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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