Mortgage

New homes remain in demand as mortgage applications rise in May

The FHA share of new-home applications reached its highest level since November 2023, the MBA reported

New-home purchase mortgage applications rose 1% month over month and 13.8% year over year in May, according to data released Thursday by the Mortgage Bankers Association (MBA).

The data is derived from the trade group’s survey of homebuilders. The MBA also estimated that sales of new single-family homes reached a seasonally adjusted annual rate of 702,000 in May, up from 699,000 in April for the strongest pace since October 2023.

“There continues to be strength in the new home purchase market, as purchase applications increased in May compared to both the prior month and from a year ago,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “With existing-home inventory still lagging in many markets, many homebuyers have turned their interest toward newly built homes.“

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This was especially true for the Federal Housing Administration (FHA) lending segment. The FHA share of new-home mortgage applications in May was 26.5%, the highest share since November 2023 (27.1%).

Conventional loans comprised 63.4% of all applications, with U.S. Department of Veterans Affairs (VA) loans accounting for 9.8% and U.S. Department of Agriculture (USDA) loans at 0.3%.

The average loan size last month across all types of new-home applications was $400,150, down from $405,000 in April.

The surge in demand for new homes is accompanied by sagging demand for existing homes. The MBA reported Wednesday that purchase applications for existing homes were down 12% year over year during the week ending June 7.

Small but steady declines in mortgage rates have created more demand for refinances, as the MBA’s refinance index rose 28% year over year for the week ending June 7.

At HousingWire’s Mortgage Rates Center on Thursday, the 30-year average rate for conforming loans stood at 7.15%. That was down 6 basis points from the same time last week and 43 basis points below this year’s peak rate of 7.58% recorded on May 2.

Closed sales of new homes missed estimates in April, with the seasonally adjusted annual rate dropping 7.7% year over year, federal data shows.

HousingWire Lead Analyst Logan Mohtashami wrote last month that new-home sales are “in a slow grind“ after bottoming out in 2022. Builders continue to offer rate buydowns to attract buyers, but these aren’t a universal incentive.

“The smaller builders don’t have this buy down advantage, and thus, we have seen a decline in homebuilder confidence data,“ Mohtashami wrote.

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