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New home purchase activity slows a bit

Key markets like Texas see rapid growth

Sunset

Applications for new home purchases fell 1% in September as the market felt the sting of seasonal changes and falling consumer confidence in the midst of escalating interest rates.

New data from the Mortgage Bankers Association shows homebuilders either in a feast or “potential famine” type of situation, depending on the location of their new properties – and this situation holds true whether you ask the MBA or homebuilders.

"We have emphasized the variation in the recovery – and the speed of the recovery – through our improving markets index," said David Crowe, chief economist for the National Association of Home Builders. The index was retired last month and replaced with the NAHB/First American Leading Markets Index.

But the data from both NAHB indices mirrors the MBA report since they all show certain real estate markets coming back faster for construction firms, while builders struggle to find business in other areas.  

The MBA’s Builder Application Survey shows a 1% month-over-month decline in new home purchase applications for September, with conventional loans still making up 68.4% of all applicants. FHA loans represented 16.6% of the pool, while the overall average loan size for a new home hit $289,650 in September, up from $284,392 last month.

The markets doing well in terms of new home purchases are located in states with energy-related jobs, such as Texas, the Dakotas and Wyoming, Crowe with NAHB pointed out.

"Texas has been particularly strong for two reasons: it didn’t sink as far, so it doesn’t have as far to come back from, and it’s heavily dependent on the energy sector of the economy, which has been doing very well for two years," Crowe told HousingWire.

Data from the MBA released on Thursday shows applications for new home purchases in September grew 5.6% in Texas month-over-month, while the states of Florida and California saw 1.6% and 15.5% increases in new purchase application activity, respectively.

But builders overall still have their struggles.

Year-over-year, new home purchase applications grew 12.4% in Texas last month, while still falling 5.1% annually in California, the MBA pointed out.

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