Applications for mortgages for new home purchases increased an impressive 9% in October compared with September and were up a whopping 31.5% compared with October 2018, according to the Mortgage Bankers Association’s (MBA) Builder Application Survey (BAS).
The increase correlates with a significant jump in housing completions that also came in October. As a result of lack of supply, there has been pent-up demand for new housing, and new homes are moving fast on the market. As builders ramp up production, new home purchase volume is expected to increase.
The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 791,000 units in October. That’s an increase of 9.1% compared with 725,000 units in September.
On an unadjusted basis, the MBA estimates that there were 61,000 new home sales in October, an increase of 8.9% compared with about 56,000 in September.
“The new home sales market continues to be strong, reinforced by October’s increase in applications for new home purchases,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “At an annual pace of 791,000 units, our estimate of new sales has reached its highest level since the inception of our survey in 2012.”
“Homebuilder sentiment remains close to 18-month highs, and housing starts and permits have increased for four straight months,” Kan adds. “These are promising signs for the housing market, as the rise in new and existing housing supply has led to slower home-price growth and improving affordability.”
Of the applications for new home purchases, 67.8% were for conventional loans, 19.2% were for FHA loans, 12.3% were for VA loans and 0.7% were for RHS/USDA loans.
The average loan size for a new home in October was $335,235, up from $330,807 in September.