Mortgage Applications for New Home Purchases Drop Year-Over-Year and Month-Over-Month in June 2021

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for June 2021 reports that mortgage applications for new home purchases declined -23.8% when compared to June 2020 and by 3% when compared to May 2021. The MBA noted that the changes do not include any adjustment for typical seasonal patterns. MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 704,000 units in June 2021, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally adjusted estimate for June is a decrease of -5% from the May pace of 741,000 units. On an unadjusted basis, MBA estimates that there were 66,000 new home sales in June 2021, a decrease of -2.9% from 68,000 new home sales in May.

In a statement prepared for the release of the BAS, Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said, “Homebuilders are encountering stronger headwinds of late, as severe price increases for key building materials, rising regulatory costs, and labor shortages impact their ability to raise production. This has dampened new home sales and quickened home-price growth. Additionally, still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers. Applications for new home purchases fell for the third consecutive month, while the average loan amount surged to another record high at $392,370. In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances.” Kan went onto say that, “Our estimate of new home sales in June dropped to its lowest annual pace since May 2020 at 704,000 units. The average pace of sales has remained strong at around 738,000 for the past three months, but it is still around 7 percent lower than the average for 2020. Last year was strongest year for new home sales in over a decade.”