Steady demand for new homes, driven by first-time buyers
Mortgage applications for new home purchases saw an 8.9% year-over-year increase in December 2024, according to the Mortgage Bankers Association (MBA).
However, when compared to the previous month, applications dropped by 3%, signaling the usual seasonal slowdown.
Despite the monthly dip, the data suggests a steady demand for new homes, particularly among first-time buyers.
MBA’s vice president and deputy chief economist Joel Kan pointed out that “Applications for newly built homes increased 9% compared to a year ago in December, while the [Federal Housing Administration] share of applications reached its second highest level in the survey’s history at 29%."
He explained that first-time homebuyers were active in the market due to a tight inventory of starter homes.
"The monthly decrease in applications was consistent with typical seasonal patterns. MBA’s estimate of seasonally adjusted new home sales fell in December but remained slightly above last year’s sales pace,” Kan added.
Based on the Builder Application Survey (BAS), MBA’s estimates for new home sales show a seasonally adjusted annual rate of 601,000 units for December 2024. This figure, which is derived from mortgage application data and other factors, marks a 15.7% decrease from November’s pace of 713,000 units. On an unadjusted basis, MBA estimated 46,000 new homes were sold in December, a decline of 6.1% from the previous month’s 49,000 sales.
The composition of loan applications remained relatively stable, with conventional loans making up 60.1% of the total, followed by FHA loans at 29.4%, VA loans at 9.9%, and RHS/USDA loans at 0.5%.
The average loan size for new homes fell slightly from $402,873 in November to $400,930 in December.
The BAS, which tracks mortgage application volume from the mortgage subsidiaries of home builders across the country, allows MBA to provide early estimates of new home sales at the national, state, and metro levels. These figures also reveal the types of loans being used by buyers. Official new home sales data, based on contract signings, is provided monthly by the US Census Bureau.
Given the data trends, what do you think is driving the shift in new home sales? Share your perspective in the comments.
