Mortgage applications for new homes fell 28.6% annually in October and declined 13% year-over-year in September, according to new data from the Mortgage Bankers Association (MBA).
“New home purchase activity weakened on a monthly and annualized basis in October, as the sharp jump in mortgage rates to nearly 7% reduced both overall demand and the purchasing power for many prospective buyers,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “The average loan size decreased to $400,616, down 8% from its peak in April 2022. The moderation in loan amounts is attributed to slower home-price growth and buyers stepping away from higher-priced homes.”
Kan added that MBA’s estimate of new home sales also declined in October, falling to 598,000 units--the slowest annualized pace since July 2022.
The MBA reports that the seasonally adjusted estimate for October is a decrease of 6.1% from the September pace of 637,000 units. Unadjusted, the MBA estimates that there were 47,000 new home sales in October 2022, a decrease of 9.6% from 52,000 new home sales in September.
Overall, a Redfin report found mortgage contract activity fell 30% across the U.S.
The report stated that the demand for homes eased in October, as one-third fewer homes went under contract than was reported in October 2021. This drop marks the largest decline in contracts since 2015.
While contracts may have dropped 30% across the nation, pandemic hotspots such as Las Vegas, Miami, and Phoenix reported contract declines of around 50%, causing a record-high share of home sellers to drop their asking price last month.
But as mortgage rates dipped below 7% in the final week of October, a handful of key measures of homebuying demand stabilized after several weeks of declines: Google searches of “Homes for Sale,” Redfin’s Homebuyer Demand Index, mortgage purchase applications, and pending sales.