New Home Purchase Applications Steady in September

After predicting a 9 percent month-over-month drop in new home sales for August, the Mortgage Bankers Association (MBA) expects sales volume for the month of September to remain essentially unchanged.

In a release on Thursday, MBA estimated new single-family home sales ran last month at a seasonally adjusted annual rate of 425,000 units, just up from a rate of 424,000 units in August. The group bases its estimate on mortgage application data gathered from mortgage subsidiaries of homebuilders and "assumptions regarding market coverage."

On an unadjusted basis, MBA estimates new home sales last month totaled 32,000, a decrease of 5.9 percent from August's prediction of 34,000.

The association's monthly estimate serves as a leading indicator of new home sales activity, preceding the government's figures by weeks. For August, the Commerce Department estimated sales of new homes were at a seasonally adjusted yearly rate of 504,000, a number that some analysts—including MBA Chief Economist Mike Fratantoni—say isn't likely to hold up in future revisions.

"Earlier this summer, and again last month, the first estimates from Census were significantly higher than the estimates implied from the applications data," Fratantoni said. "However, the revised data from Census resulted in a much closer match to MBA's estimates, and we anticipate that will be the case going forward, given the high rate of coverage in our survey."

By product type, conventional loans accounted for 67.6 percent of September's new home purchase applications. Loans backed by the Federal Housing Administration (FHA) made up the second largest share of applications at 16.7 percent, followed by Veterans Affairs mortgages at 14.5 percent. Loans insured by rural housing agencies trailed at just 1.2 percent of applications.

MBA reported the average loan size for new homes came down in September, dropping to $298,274 from more than $300,000 in August.