Housing MarketMortgageReal Estate

Homebuilders get hit with more bad news

Mortgage applications for new homes fell 7% in July from the prior month

July was another rough month for homebuilders, with mortgage applications for new home purchases dropping 16.1% from a year ago, according to the latest Mortgage Bankers Association‘s builder application survey.

Compared to June 2022, applications decreased by 7%.

“Mortgage applications to purchase newly built homes weakened in July, as prospective homebuyers continue to delay decisions because of economic uncertainty and still-high home prices and mortgage rates,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The slide in purchase applications for new homes – now down for the fourth consecutive month and 16% lower than a year ago – is consistent with data on declining homebuilder sentiment and slowing permitting activity for new construction.”

The MBA’s estimate of new home sales came in at a 591,000-unit sales pace in July, the slowest since April 2020. On an unadjusted basis, the MBA estimated that there were 50,000 new home sales in July 2022, a decrease of 10.7% from the revised 56,000 new home sales in June. 

By product type, conventional loans composed 70.7% of loan applications, FHA loans composed 17.7%, RHS/USDA loans composed 0.2% and VA loans composed 11.4%. The average loan size of new homes decreased from $423,221 in June to $416,029 in July.

The data echoes housing start statistics from July, which dropped 9.6% from June, according to a report released last week by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

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“The decrease in single-family housing starts mirrors the decline in homebuilder confidence, which turned negative in August, driven by declines in all three components of the index: current single-family home sales, future sales expectations, and traffic of prospective buyers,” Odeta Kushi, First American’s deputy chief economist, said in a statement last week.

Logan Mohtashami, HousingWire’s lead analyst, said it’s yet another sign of a housing recession, and it won’t abate until mortgage rates fall.

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