The demand from consumers who are looking to buy an existing home is spilling over into new home purchases, according to a new report from the Mortgage Bankers Association.
The MBA Builder Applications Survey tracks application volume from mortgage subsidiaries of homebuilders across the country.
The latest survey reported that for July, which sits toward the end of the spring and fall home-buying rush, mortgage applications for new home purchases increased 5.1% compared to July 2016.
On a monthly basis, applications decreased by 12% from June. This change does not include any adjustment for typical seasonal patterns.
While the drop is expected for the month, the uptick from last year shows an increase from the typical July demand.
Lynn Fisher, MBA’s vice president of Research and Economics, explained, “The year over year increase in applications to homebuilders for new home purchase mortgages slowed down somewhat in July, after relatively strong showings in May and June. Nonetheless, the pattern of applications over the last three months suggests that housing starts will fall off less than expected during late summer and early fall as demand spills over from the low-inventory existing home market into the market for new homes.”
“Year to date, through July, applications for new homes remain up by more than 7% compared to the same period last year,” she added.
Broken up by product type, conventional loans composed 69.8% of loan applications, FHA loans composed 15.7%, RHS/USDA loans composed 1.1% and VA loans composed 13.3%.
And following recent trends, the average loan size of new homes increased from $327,833 in June to $329,483 in July.
The MBA report echoes recent sentiments from homebuilders. According to the most recent report, homebuilder confidence for newly-built single-family homes is historically high. Homebuilders are reportedly switching gears from the luxury market, which they focused on the past several years, to starter homes.