MBA Predicts Economic and Rate Uncertainty Depressed New Home Sales

The Mortgage Bankers Association (MBA) says it expects that new home sales declined in September relative to August based on a drop in mortgage applications to finance their purchase.  MBA says its Builder Application Survey showed there were 8 percent fewer applications in September than in August, but those applications were submitted at a rate 34.2 percent higher than a year earlier. The data does not include any adjustment for typical seasonal patterns.

Based on this information and on assumptions regarding other factors such as market coverage, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 725,000 units in September. This represents a decrease of 7.6 percent from the August pace of 785,000 units. On an unadjusted basis, MBA estimates that there were 56,000 new home sales 8.2 percent fewer than the 61,000 new home sales in August.

“Applications for new home purchases fell in September but remained 34.2 percent higher than a year ago, with our estimate for new home sales following a similar pattern. Last month’s slowdown was likely caused by ongoing economic and interest rate uncertainty, as well as the fact that homebuilders continue to grapple with high building costs and labor shortages,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting. “Purchase applications this year for new and existing homes for sale have consistently outpaced year ago levels. This trend should continue in the final months of the year – especially considering how much higher rates were at the end of 2018.” 

Applications for conventional financing made up 69.2 percent of loan applications, those for FHA loans had an 18.4 percent share and VA loans 11.6 percent. RHS/USDA loans comprised 0.9 percent of the total.  The average loan size of new homes decreased from $332,497 in August to $330,807 in September. 

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. 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. The Census Bureau data for September will be released on October 24.