December New Home Purchase Mortgage Applications Down 13%; Home Builder Sentiment Stabilizes

The Mortgage Bankers Association this morning reported December mortgage applications for new homes fell by 13 percent from November and by 6.1 percent from a year ago.

In a separate report yesterday, the National Association of Home Builders reported its January Housing Market Index stabilized amid lower interest rates.

MBA Builder Applications Survey data for December showed new home applications fell for the second consecutive month. By product type, conventional loans composed 69.5 percent of loan applications, FHA loans composed 17.3 percent, RHS/USDA loans composed 0.7 percent and VA loans composed 12.5 percent. The average loan size of new homes increased from $326,037 in November to $334,944 in December.

“Factors such a volatile stock market and economic uncertainty both here and abroad likely kept some prospective buyers away,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “This pullback in activity was in spite of falling mortgage rates and a job market still running on all cylinders. Looking ahead, if mortgage rates remain low, home-price growth continues to moderate and housing inventory rises, we do expect to see a rebound in purchase activity come spring.”

MBA estimated new single-family home sales at a seasonally adjusted annual rate of 552,000 units in December, a decrease of 12 percent from the November pace of 627,000 units. On an unadjusted basis, MBA estimated 37,000 new home sales in December, a decrease of 17.8 percent from 45,000 new home sales in November.

The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

Meanwhile, the NAHB/Wells Fargo Housing Market Index said lower interest rates stabilized builder confidence in January. It reported builder confidence in the market for newly built single-family homes rose two points to 58 in January

All three HMI indices posted gains in January. The index measuring current sales conditions rose two points to 63, the component gauging expectations in the next six months increased three points to 64 and the metric charting buyer traffic edged up one point to 44.

However, looking at the three-month moving averages for regional HMI scores, the Northeast dropped five points to 45; the Midwest and South both fell three points to 52 and 62, respectively; and the West registered a one-point drop to 67.

NAHB Chief Economist Robert Dietz said on the gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment. “Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months,” he said.

“The housing market has received a much needed reprieve from higher mortgage rates, which peaked near 5% in mid-November but have since fallen,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “An increasingly dovish Fed content to pause on rate increases during the first half of the year would likely help stem the erosion in home buying seen over the last nine months of 2018.”

The MBA Builder Applications Survey tracks application volume from mortgage subsidiaries of home builders across the country. Using these 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. These data also provide information regarding types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In those data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.

For additional information on MBA’s Builder Applications Survey, click