Sluggish Loan Applications Show Weakness in New Home Sales
While the Mortgage Bankers Association (MBA) is predicting newly constructed homes sold at a much higher rate in November than they did a year earlier, sales are expected to be down significantly from this past October.
MBA's
Builder Application Survey (BAS) data for November 2019 shows mortgage
applications for new home purchases increased 27.1 percent compared to November
2018 but were down 17 percent from the prior month. This change does not
include any adjustment for typical seasonal patterns.
Based on the application data and information about market coverage and other
data, the association estimates new single-family home sales were running at a
seasonally adjusted annual rate of 688,000 units during the month. This estimate
is a decrease of 13 percent from the October pace of 791,000 units. On an
unadjusted basis, MBA estimates that there were 51,000 new home sales in
November 2019, down 16.4 percent from 61,000 sales in October.
"Applications for new home purchases continue to outperform last year's pace,
and November was no different. Activity last month was 27 percent higher than
November 2018," said Joel Kan, MBA's Associate Vice President of Economic and
Industry Forecasting. "On a seasonally-adjusted monthly basis, new applications
decreased to the slowest pace since June 2019, which points to some weakness as
this year comes to an end. The healthy job market, increased new home
construction, and rising household formation support growth heading into 2020,
but affordability challenges in many markets and economic uncertainty pose as
headwinds."
Conventional loans had a 69.2 percent share of new home loan applications, 18
percent were for FHA loans and 12.2 percent VA loans. RHS/USDA loans accounted
for 0.6 percent of the total. The average loan size for purchasing a new house
increased from $335,235 in October to $337,943 in November.
MBA's Builder Application Survey tracks application volume from mortgage
subsidiaries of home builders across the country. Utilizing this and other data,
MBA is able to provide an early estimate of new home sales volumes at the
national, state, and metro level and to provide 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's November new home sales data will be released on December 23.