New Home Sales, Prices Faded in October

The Mortgage Bankers Association (MBA) notes that applications for the purchase of new homes declined by 2.1 percent in October compared to the same month in 2017.  Those applications were also 11 percent lower than in September.  The information, taken from responses to MBA's Builder Application Survey, does not include any adjustment for seasonal patterns.

Based on the survey results and other assumptions including about market coverage, MBA estimates that new single-family home sales were at a seasonally adjusted rate of 673,000 in October, an increase of 4.7 percent from the September sales rate of 643,000 units. On an unadjusted basis, the MBA projects 53,000 new home sales occurred during the month, up by 6 percent from 50,000 sales in September.

Conventional loan applications accounted for 70.9 percent of the total, FHA loans comprised 17.1 percent, VA applications 11.2 percent, and RHS/USDA applications made up 0.7 percent. The average loan size of new homes decreased from $333,086 in September to $331,732 in October.

Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "While we have seen some monthly swings in new home sales in 2018, the year-to-date average sales pace is around seven percent higher than the same period in 2017. Additionally, the average loan size for a new home purchase application, at around $332,000, was at its lowest since July 2017. This is potentially a sign that there has been some additional inventory in the new home market, and that the rapid price growth in some geographies is starting to ease."

MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.  October new home sales will be reported on Wednesday, November 28.