Applications to buy new construction homes dropped 12% year over year in June due to higher mortgage rates and economic uncertainty, according to the latest builder application survey from the Mortgage Bankers Association (MBA). Month over month, application volume dipped by 10%.
New residential construction and permitting activity weakened from March through May, which reduced the number of homes available for home buyers, according to survey results.
MBA estimates about 620,000 new single-family homes were sold in June at a seasonally adjusted annual rate, marking a 15% drop, or more than 100,000 homes, compared to May.
“Higher mortgage rates and heightened economic uncertainty cooled borrower demand in June, leading to new-home purchase applications declining to the lowest level since April 2020,” said Joel Kan, associate vice president of economic and industry forecasting at the MBA.
Mortgage rates have been volatile in recent weeks, following the Federal Reserve‘s interest rate hike of 75 basis points last month. After falling 40 bps two weeks ago to 5.30%, purchase mortgage rates climbed back last week to 5.5%, according to the latest Freddie Mac PMMS.
The average loan size dropped to $426,966 in June from May’s $430,855, MBA said.
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Conventional loans accounted for 73.7% of loan applications. Federal Housing Administration (FHA) loans made up 15%, Veterans Affairs (VA) loans were 10.7% of total applications and Rural Housing Service (RHS) and United States Department of Agriculture (USDA) loans contributed 0.5%.
The survey tracks application volume from mortgage subsidiaries of homebuilders across the country. Using this data, MBA provides an early estimate of new home sales volumes at the national, state and metro level.