In August 2022, the Mortgage Bankers Association (MBA) reported that new home purchase mortgage applications decreased by 10.1% compared to August 2021. Data collected in the MBA Builder Application Survey (BAS) has resulted in a 17% increase in applications compared to July 2022.
MBA’s Builder Application Survey tracks application volume from home builder mortgage affiliates across the country. Using this data, as well as data from other sources, MBA provides an early estimate of new home sales volume at the state, state and metro levels. The new home sales estimate is derived using mortgage application information from the BAS, market coverage assumptions and other factors.
The MBA estimated that new single-family homes sold at a seasonally adjusted annual rate of 699,000 units in August 2022, which was a leading indicator of the US Census Bureau’s New Residential Sales Report based on data from the BAS.
“New home buyers’ applications fell year-on-year but rebounded in August after four straight months of declines, despite higher mortgage rates, falling homebuilder sentiment and looming economic uncertainty. Average loan size has declined for the fourth straight month, a sign of slowing home price growth in the new home market,” said Joel Kan, associate VP of economic and industry forecasting at MBA. “Continued volatility in mortgage rates over the coming months may result in larger swings than is common in new home sales. Between moderate selling prices and volatile mortgage rates, buyers appear to be waiting.”
Mortgage rate volatility, mentioned by Kan, increased sharply this week as Freddie Mac reported that the 30-year fixed-rate mortgage (FRM) was up 25 basis points week-on-week, averaging 6.29% and 0.9 points as of September 22, 2022. This news came ahead of the Fed’s latest rate hike of 75 basis points at the end of its scheduled two-day meeting to a rate of 3.00-3.25% – marking the highest interest rate in history for 14 years.
“The MBA estimate of new home sales rose 18% in August, taking the sales pace to 699,000 units, the strongest pace since May 2022,” Kan added. “The current pace of sales is still 23% below the November 2021 peak and is down 20% year-on-year.”
The seasonally adjusted estimate for August is up 18.3% from the July pace of 591k units. On an unadjusted basis, MBA estimates that there were 58,000 new home sales in August 2022, up 16% from July’s 50,000 new home sales.
By product type, 72.1% of loan applications were conventional loans, 17% FHA loans, 0.2% RHS/USDA loans, and 10.7% VA loans. The average new home loan size fell from $416,029 in July to $415,594 in August.