In response to lower mortgage rates and typical seasonal patterns, mortgage applications for new-home purchases increased month over month in January.
Compared with 2022, applications increased by 42% in January, according to the Mortgage Bankers Association’s (MBA’s) Builder Application Survey (BAS). On a year-over-year basis, mortgage applications for new-home purchases decreased 3.5%.
“The 30-year fixed rate declined almost 40 basis points over the month, and this stirred home buyers to act, especially those who might have delayed their purchase when mortgage rates were higher,” says Joel Kan, MBA’s vice president and deputy chief economist.
The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 725,000 units in January, a 13.1% increase on a month-over-month basis, according to Kan. On an unadjusted basis, MBA estimates there were 63,000 new-home sales in January, a 40% increase compared with December.
“However, activity was still 12% behind last year’s pace, when mortgage rates were over 2 percentage points lower,” Kan says. “January was also a strong month for single-family housing completions, according to the U.S. Census Bureau. Home builders may have offered additional incentives to sell some of their inventory after last year’s slowdown in sales.”
Kan says while home builders have reported improved sentiment, housing starts and permitting activity has “not picked up yet.” Additionally, Kan says the recent upward trend in mortgage rates could slow purchasing activity for many prospective buyers and “delay a potential turning point in the housing market.”
Conventional loans composed 68.4% of loan applications in January, FHA loans composed 20.3% of loans, VA loans composed 11% of loans, and RHS/USDA loans composed 0.3% of loans, according to the MBA. The average loan size of new homes increased to $401,631 in January from $399,555 in December.
The MBA’s BAS tracks application volume from mortgage subsidiaries of home builders across the country. From the data collected, MBA is able to provide an early estimate of new-home sales volumes at the national, state, and metro level.
