Rising Mortgage Rates Put Damper on Home Purchase Mortgage Applications
October mortgage applications for new home purchases fell by 13 percent from September and by 28.6 percent from a year ago, the Mortgage Bankers Association reported Thursday.
The MBA Builder Application Survey reported by product type, conventional loans composed 68.6 percent of loan applications; FHA loans composed 20.1 percent; RHS/USDA loans composed 0.3 percent; and VA loans composed 11 percent. The average loan size of new homes decreased from $406,767 in September to $400,616 in October.
“New home purchase activity weakened on a monthly and annualized basis in October, as the sharp jump in mortgage rates to nearly 7 percent reduced both overall demand and the purchasing power for many prospective buyers,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “The moderation in loan amounts is attributed to slower home-price growth and buyers stepping away from higher-priced homes.”
MBA estimated new single-family home sales, which has consistently been a leading indicator of the U.S. Census Bureau’s New Residential Sales report, at a seasonally adjusted annual rate of 598,000 units in October, a decrease of 6.1 percent from the September pace of 637,000 units to the slowest annualized pace since July. On an unadjusted basis, MBA estimates 47,000 new home sales in October, a decrease of 9.6 percent from 52,000 new home sales in September.
The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. Changes do not include adjustments for typical seasonal patterns.
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 the MBA Builder Applications Survey, click here.
