Decline in mortgage applications for new homes in May

Data from the Mortgage Bankers Association (MBA) Construction Applications Survey for the month of May shows a 5% year-over-year decline in mortgage applications for new home purchases. Month over month, claims fell 4%, which does not include any adjustment for normal seasonal trends.

“Applications for new homes in May fell 4% from April as mortgage rates hit 5.5% and further dampened demand. Activity was already constrained due to inventory for sale tight, high sales prices and extended construction completion times,” says Joel Kan, associate vice president of economic and industry forecasting at MBA.

“After increasing for 15 consecutive months, the average loan size has fallen slightly from the April survey high of $430,855, which is a potential indication that cooling demand may be starting to moderate the price growth. MBA’s estimate of new home sales rose for the first time in five months, posting a 4% gain to a sales pace of 727,000 units.

Based on survey data, MBA estimates that sales of new single-family homes proceeded at a seasonally-adjusted annual rate of 727,000 units in May. This estimate is made using mortgage application information from the survey and market coverage assumptions and other factors.

For May, the seasonally adjusted estimate shows a 3.7% increase from April’s 701,000 units. On an unadjusted basis, MBA estimates 61,000 new home sales in May, down from 65,000 new home sales in April, or 6.2%.

For new homes, the average loan size rose from $436,576 in April to $430,855 in May. Conventional loans accounted for 75.8% of loan applications, with FHA loans accounting for 13.6%; RHS/USDA loans at 0.2%; and 10.4% VA loans.

The survey tracks the volume of applications through the mortgage affiliates of homebuilders across the country. Using this data among other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro levels. Official estimates of new home sales are made monthly by the Census Bureau.

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