New Home Purchase Mortgage Applications Decrease in January

The Mortgage Bankers Association's (MBA) Builder Application Survey (BAS) data for January 2023 shows that mortgage applications for new home purchases decreased 3.5% compared to a year ago. Compared to December 2022, applications increased by 42%. This change does not include any adjustment for typical seasonal patterns.

“Applications for new home purchases increased in January, driven by typical seasonal patterns and lower mortgage rates,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “The 30-year fixed rate declined almost 40 basis points over the month and this stirred some homebuyers to act, especially those who might have delayed their purchase when mortgage rates were higher. MBA’s estimate of seasonally adjusted new home sales was also up robustly, seeing a 13% gain in the sales pace. However, activity was still 12% behind last year’s pace, when mortgage rates were over two percentage points lower. January was also a strong month for single-family housing completions, according to the U.S. Census Bureau. Home builders may have offered additional incentives to sell some of their inventory after last year’s slowdown in sales.”

Added Kan, “Home builders have reported improved sentiment in the last two months according to the NAHB’s HMI release, but Census data on January new residential construction showed that single-family housing starts and permitting activity have not picked up yet. Additionally, home buyers remain sensitive to mortgage rates, which have trended higher in recent weeks and could delay a potential turning point in the housing market.”

MBA estimates new single-family home sales, which has consistently been a leading indicator of the U.S. Census Bureau’s New Residential Sales report, is that new single-family home sales were running at a seasonally adjusted annual rate of 725,000 units in January 2023, based on data from the BAS.

The seasonally adjusted estimate for January is an increase of 13.1% from the December pace of 641,000 units. On an unadjusted basis, MBA estimates that there were 63,000 new home sales in January 2023, an increase of 40% from 45,000 new home sales in December.

By product type, conventional loans composed 68.4% of loan applications, FHA loans composed 20.3%, RHS/USDA loans composed 0.3% and VA loans composed 11%. The average loan size of new homes increased from $399,555 in December to $401,631 in January.