US New-Home Purchase Mortgage Applications Decrease in October

On Monday, the Mortgage Bankers Association (MBA) reported that mortgage applications for new-home purchases fell 1.0% in October, according to data from its Builder Application Survey. Applications were down 2.6% from a year earlier. Changes are not seasonally adjusted.

MBA estimates new single-family home sales were running at a seasonally adjusted annual rate (SAAR) of 771,000 units in October, a 13.4% increase from the September pace of 680,000 units. On an unadjusted basis, MBA estimates there were 55,000 sales in October, a 1.9% increase from 54,000 in September.

By product type, conventional loans accounted for 51.9% of applications, FHA loans 35.1%, VA loans 12.3%, and RHS/USDA loans 0.7%. The average loan size rose from $379,107 in September to $381,404 in October.

Commenting on the report, MBA Vice President and Deputy Chief Economist Joel Kan said:

“Lower mortgage rates, ongoing usage of builder concessions, and growing levels of for-sale inventory drove an increase in new home sales for October. The annual sales pace, at 771,000 units, was the strongest in over a year. The increased use of ARM loans, for which rates were averaging almost 80 basis points lower than fixed-rate loans, also contributed to the jump in sales and a slightly higher average loan size, the third monthly increase. In October, our data showed that ARM loans accounted for 25% of applications, up from 16% a year ago.

The MBA’s new-home sales estimate is a useful leading indicator of the Census new-home sales number, which has not been published since the August data release. Unadjusted mortgage applications counts declined slightly over the month but remained at a healthy pace relative to the past three years.”