Annual applications rise as monthly numbers take a hit – what's next?
New home purchase activity weakened in September as the housing market continued to experience a mix of highs and lows.
Data from the Mortgage Bankers Association's (MBA’s) recent survey, mortgage applications for new home purchases in September faced a 12% decrease from the previous month.
"New home purchase activity weakened in September, as the recent spike in mortgage rates pushed more homebuyers out of the market," said Joel Kan, MBA's deputy chief economist.
Despite the monthly decline, applications were still 14.9% higher than a year ago, marking the eighth consecutive month of annual gains.
The persistent shortage of resale inventory continues to drive demand for newly constructed homes. "MBA's estimate of new home sales dropped to a 634,000-unit pace, the weakest sales pace since October 2022," Kan said.
This estimate, derived from the BAS and other factors, represents a 9.7% decrease from the August pace of 702,000 units. On an unadjusted basis, there were 51,000 new home sales in September 2023, a 13.6% drop from 59,000 new home sales in August.
However, the increasing mortgage rates are making a noticeable impact on would-be buyers.
"The FHA share of applications reached 25% in September, the highest share in the survey dating back to 2013," Kan added. "This is an indication that demand from first-time homebuyers is still somewhat strong."
By product type, conventional loans comprised 65.1% of loan applications, FHA loans 25.1%, RHS/USDA loans 0.3%, and VA loans 9.5%. The average loan size for new homes decreased slightly, moving from $398,092 in August to $397,550 in September.
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