Mortgage Applications for New Home Purchases Up Month-Over-Month but Down Year-Over-Year in January

The Mortgage Bankers Association (MBA) is reporting that data from its January 2023 Builder Application Survey (BAS) reveals mortgage applications for new home purchases dropped 3.5% year-over-year. This change does not include any adjustments for typical seasonal patterns.

According to the MBA, the seasonally adjusted estimate for January is an increase of 13.1% from the December pace of 641,000 units. On an unadjusted basis, the MBA estimates that there were 63,000 new home sales in January, a 40% increase from the 45,000 new home sales in December.

Adding additional background and his analysis, MBA’s Vice President and Deputy Chief Economist Joel Kan said:

“Applications for new home purchases increased in January, driven by typical seasonal patterns and lower mortgage rates. The 30-year fixed rate declined almost 40 basis points over the month and this stirred some homebuyers to act, especially those who might have delayed their purchase when mortgage rates were higher. MBA’s estimate of seasonally adjusted new home sales was also up robustly, seeing a 13 percent gain in the sales pace. However, activity was still 12 percent behind last year’s pace, when mortgage rates were over two percentage points lower. January was also a strong month for single-family housing completions, according to the US Census Bureau. Home builders may have offered additional incentives to sell some of their inventory after last year’s slowdown in sales.

Home builders have reported improved sentiment in the last two months according to the NAHB’s HMI release, but Census data on new residential construction for January showed that single-family housing starts and permitting activity have not picked up yet. Additionally, home buyers remain sensitive to mortgage rates, which have trended higher in recent weeks and could delay a potential turning point in the housing market.”