Applications for mortgages for new home purchases jumped a dramatic 42% in January compared with December but were down 3.5% compared with January 2022, according to the Mortgage Bankers Association.
“Applications for new home purchases increased in January, driven by typical seasonal patterns and lower mortgage rates,” says Joel Kan, vice president and deputy chief economist for the MBA, in a statement. “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.”
The MBA’s estimate of seasonally adjusted new home sales “was also up robustly, seeing a 13 percent gain in the sales pace,” Kan says.
“However, activity was still 12 percent behind last year’s pace, when mortgage rates were over two percentage points lower,” he says. “January was also a strong month for single-family housing completions, according to the U.S. Census Bureau. Home builders may have offered additional incentives to sell some of their inventory after last year’s slowdown in sales.”
Citing recent data from the National Association of Home Builders, Kan says that home builders “have reported improved sentiment in the last two months.”
However, “Census data on January new residential construction showed that single-family housing starts and permitting activity have not picked up yet,” he adds.
“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.”
New single-family home sales were running at a seasonally adjusted annual rate of 725,000 units in January. That’s an increase of 13.1% compared with December.
On an unadjusted basis, the MBA estimates that there were 63,000 new home sales in January, an increase of 40% compared with December.