Mortgage rate volatility affecting pace of new home sales

Application volume for new home purchases in August down 10% year-over-year: MBA

New home purchase applications in August were down year over year but rebounded after four consecutive months of declines despite higher mortgage rates, declining homebuilder sentiment and looming economic uncertainty, the Mortgage Bankers Association (MBA) said.

The MBA’s builder application survey (BAS) data for August showed mortgage applications for new home purchases declined 10.1% from a year ago. Application volume rose 17% from July 2022. 

About 699,000 new single-family homes were sold in August at a seasonally adjusted annual rate, marking an 18.3% increase from July, but still 23% lower than the November 2021 peak and down 20% from last year, the MBA estimated.

“Ongoing volatility in mortgage rates in the months ahead may lead to larger than typical swings in the pace of new home sales,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Between moderating sales prices and volatile mortgage rates, buyers seem to be biding their time.”

Mortgage rates have been on an upward trend since August after retreating briefly in July. The average 30-year fixed-rate rates closed out the month of July at around 5.1%, according to Mortgage News Daily, and hit 6.42% on September 19. With the Federal Reserve expected to conduct its fifth rate hike of the year on Wednesday, industry watchers will be closely watching how the markets respond to the Fed’s actions.  

The average loan size of new homes declined for the fourth straight month to $415,594 in August from last month’s $416,029, which is a sign of “slowing home-price growth in the new homes market,” according to Kan. 

More than ever lender profitability requires maintaining pace with innovation

Lenders continue to face tightening profit margins as mortgage rates stay substantially higher than they were last year. In light of this, HousingWire recently caught up with Teraverde’s Rob Peterson to learn more about what lenders need to succeed in today’s lending environment.

Presented by: Teraverde

Conventional loans accounted for 72.1% of loan applications. Federal Housing Administration (FHA) loans made up 17%, Veterans Affairs (VA) loans were 10.7% of total applications and Rural Housing Service (RHS) and United States Department of Agriculture (USDA) loans contributed 0.2%. 

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. 

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