Mortgage apps to buy new homes rise month-to-month

Lower mortgage rates for much of November brought some purchasers of newly constructed homes back into the market, the Mortgage Bankers Association said.

Its builder application survey for November was up 1% from October, although still down 25.2% from November 2021. The data is not seasonally adjusted. It is the first time application activity increased on a month-to-month basis since August.

“New home purchase applications recovered slightly in November, as mortgage rates retreated from their October highs and brought some prospective buyers back into a market that still faces affordability challenges,” said Joel Kan, the MBA’s deputy chief economist, in a press release. “Similarly, estimated new home sales for November saw an annual pace of 660,000 units — a 10% increase from October.”

Meanwhile, November’s residential starts data, also released on Dec. 20, was down 0.5%, while permits for construction of one-family homes fell 7.1%, the weakest pace since 2020.

“The Federal Reserve faces a catch-22 when it comes to the housing market,” Odeta Kushi, deputy chief economist at First American Financial, said in a comment on the housing starts data. “Higher rates have reduced affordability and prompted a rapid pullback in demand, but the pullback in demand has also caused builders to halt production of new homes.”

December’s National Association of Home Builders/Wells Fargo sentiment survey index value fell to 31, the lowest level since June 2012, except for the early days of the pandemic.

The MBA, using builder application survey data, estimated November’s new home sales ran at a seasonally adjusted annual rate of 660,000 units, an increase of 10.4% from October’s 598,000 units. Unadjusted data estimated 49,000 new home sales in November, up 4.3% from 47,000 the prior month.

Over two-thirds of November’s new home buyers, 67.6% applied for a conventional mortgage. Another 21.3% sought Federal Housing Administration financing, 10.9% opted for a Veterans Affairs loan and 0.2% sought U.S. Department of Agriculture Rural Housing Service funding.

“Reflecting the slowdown at the upper end of the market, the average loan size on new home purchase applications was $392,465, the lowest since June 2021,” Kan said. That is down from $400,616 in October.