In August 2022, the Mortgage Bankers Association (MBA) reported [1] that mortgage applications for new home purchases decreased 10.1% compared to August 2021. Data recorded in the MBA’s Builder Application Survey (BAS), compared to July 2022, applications increased by 17%.
MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA provides an early estimate of new home sales volumes at the national, state, and metro level. 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 MBA estimates new single-family home sales, which has 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 699,000 units in August 2022, based on data from the BAS.
“New home purchase applications were down year-over-year but rebounded in August after four consecutive months of declines, despite higher mortgage rates, declining homebuilder sentiment, and looming economic uncertainty. The average loan size decreased for the fourth straight month, which is a sign of slowing home-price growth in the new homes market,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting [2]. “Ongoing volatility in mortgage rates in the months ahead may lead to larger swings than is typical in the pace of new home sales. Between moderating sales prices and volatile mortgage rates, buyers seem to be biding their time.”
The volatility in mortgage rates that Kan mentions took a deep hike upward this week, as Freddie Mac reported [3] that the 30-year, fixed-rate mortgage (FRM) jumped 25-basis points week-over-week, averaging 6.29% with an average 0.9 point as of September 22, 2022. This news came ahead of the Fed’s most recent rate hike of 75-basis points [4] at the conclusion of their scheduled two-day meeting to a rate of 3.00-3.25%—marking the highest interest rate in 14 years.
“MBA’s estimate of new home sales jumped 18% in August, bringing the sales pace to 699,000 units, which is the strongest pace since May 2022,” added Kan. “The current sales pace is still 23% lower than the November 2021 peak, and is down 20% from last year.”
The seasonally adjusted estimate for August is an increase of 18.3% from the July pace of 591,000 units. On an unadjusted basis, MBA estimates that there were 58,000 new home sales in August 2022, an increase of 16% from 50,000 new home sales in July.
By product type, conventional loans composed 72.1% of loan applications, FHA loans composed 17%, RHS/USDA loans composed 0.2% and VA loans composed 10.7%. The average loan size of new homes decreased from $416,029 in July to $415,594 in August.