35.5% Jump in July’s Mortgage Applications for New Home Buys

35.5% Jump in July's Mortgage Applications for New Home Buys

Mortgage applications for new home purchases witnessed a remarkable 35.5% year-over-year increase in July, according to the latest data from the Mortgage Bankers Association (MBA). While the annual growth paints a vivid picture of strong demand, the numbers also show a slight month-over-month uptick of 0.2% compared to June’s applications.

The MBA’s new findings illustrate that new single-family home sales were operating at a seasonally adjusted annual rate of 677,000 units in July. Although this indicates a 1.5% decrease from June’s rate of 687,000 units, it is important to see it in the context of the broader market’s performance. On an unadjusted basis, the MBA has estimated that there were 56,000 new home sales in July 2023, a 6.7% dip from the 60,000 new home sales recorded in June.

Interestingly, the average loan size for new homes also showed a reduction, falling from $400,281 in June to $397,148 in July. A closer examination of the product type reveals that conventional loans made up 65.3% of loan applications, followed by FHA loans at 24.2%, VA loans at 10.2%, and RHS/USDA loans comprising a mere 0.3%.

Joel Kan, MBA’s vice president and deputy chief economist, took particular note of the FHA’s share of purchase applications, pointing out that it was the highest share since May 2020. The significance of this trend lies in the popularity of FHA purchase loans among many first-time homebuyers.

“FHA purchase loans are a popular option for many first-time homebuyers, and this increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions,” Kan said.

The data underscores the delicate balance in the housing market, as new buyers explore various options amid tight inventory and fluctuating mortgage rates. While the increase in mortgage applications for new homes is a positive sign, the slight dip in sales and loan size may suggest caution among buyers and lenders.

The continued reliance on FHA loans by first-time buyers emphasizes the importance of programs that cater to those entering the housing market for the first time, particularly when faced with limited options and affordability challenges. The surge in new home mortgage applications may be seen as a reaction to a broader market environment where buyer competition is intense and new strategies must be employed to secure homeownership. As the market continues to evolve, the role of new home purchases and innovative lending products will likely remain at the forefront of industry trends.

Chris has been in the marketing industry for well over a decade. Chris loves writing about anything related to saving money. A passion for teaching people through writing has given him a unique opportunity to use his skills in the marketing industry. In his spare time he likes spending time with his family. training his new puppy, and taking long road trips to places like Banff & Lake Louise, Alberta.
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