December New Home Purchase Mortgage Applications Down 25.2 Percent

Mortgage applications for new home purchases in December fell by 5 percent from November and by 25.2 percent from a year ago, the Mortgage Bankers Association reported Thursday.

The MBA Builder Applications Survey reported by product type, conventional loans composed 69.1 percent of loan applications, FHA loans composed 20.0 percent, RHS/USDA loans composed 0.3 percent and VA loans composed 10.5 percent. The average loan size of new homes increased from $392,465 in November to $399,555 in December.

“December new home purchase activity – both for applications and estimated sales – ran more than 20 percent behind last year’s pace,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “The decline in activity was in line with single-family housing starts that were 32 percent lower than a year ago. Higher mortgage rates and a weakening economy held back buyers at the end of last year.”

Kan noted Wednesday’s builder sentiment index from the National Association of Home Builders reflected an improving outlook, with mortgage rates down from recent highs and increased buyer traffic as mortgage rates have backed off from recent highs.

“The housing market is still in need of more starter and entry-level homes, especially when current demographic trends point to the potential for more younger households to enter homeownership in the near future,” Kan said. “New construction of these units will help buyers entering the housing market.”

MBA estimated new single-family home sales, which have consistently been a leading indicator of the U.S. Census Bureau’s New Residential Sales report, at a seasonally adjusted annual rate of 641,000 units in December, a decrease of 2.9 percent from the November pace of 660,000 units. On an unadjusted basis, MBA estimated 45,000 new home sales in December, a decrease of 8.2 percent from 49,000 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. 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.