MBA Chart of the Week: New Home Purchase Applications by Loan Type

Source: MBA Builder Applications Survey (www.mba.org/builderapps)

Mortgage applications to buy newly built homes have been seeing year-over-year growth since 2023, and in the MBA Builder Applications Survey results for September 2024, purchase applications were up 11% on an annual basis. New home purchase activity has outperformed existing home purchases in recent years because newly built homes coming to the market have been a welcome relief for extremely low levels of existing homes for sale. Many owners of existing homes are still “locked in” because of the low-rate mortgages they are holding relative to current market rates.

Within these new home purchase applications, conventional loans continue to account for a majority of applications with a 61% share in September. FHA loans had the next largest share at almost 29%, followed by VA loans and USDA/RHS loans. The FHA share is notable, as from 2013 to 2022, that share averaged 17%. Starting in 2023, the FHA share grew from 20% to a survey high of almost 30% in August 2024. According to data from HUD, first time home buyers (FTHB) account for more than 80% of FHA purchase endorsements, which implies that a large portion of these FHA purchase applications are likely going to FTHBs.

With an increasing number of potential homebuyers coming from younger age cohorts, it is a positive sign that these buyers are in the market for a home and important that the appropriate financing is available for qualified borrowers. New homes continue to be an attractive option for prospective homebuyers, and analysis by the NAHB has shown that the townhouse share of new construction continues to grow, which will help support housing market growth given that starter homes have been in short supply for quite some time.

–Joel Kan (jkan@mba.org)