Applications for mortgages for new home purchases surged in October, due mainly to a slight drop in mortgage interest rates that came at the end of the month.
According to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS), applications for new home purchases increased 6% compared with September and were up a whopping 39.7% compared with October 2022.
“Purchase activity for newly constructed homes continued its upward climb in October with purchase applications up 40 percent compared to a year ago, the ninth consecutive month of annual growth,” says Joel Kan, vice president and deputy chief economist for the MBA, in a statement. “Home builders have been able to temper this high-rate environment by offering buyers rate buydowns and other incentives. We estimate that the pace of home sales increased for the third straight month to a 715,000-unit annual pace – the strongest sales month since May.
“The FHA share of applications increased to 26 percent, the highest share since the survey began in 2013, as more first-time homebuyers turn to the new home market for more options and as some builders start to build more starter homes,” says Kan.
Sales of new, single-family homes were running at a seasonally adjusted annual rate of 715,000 units in October, an increase of 12.8% compared with September.
On an unadjusted basis, the MBA estimates that there were 55,000 new home sales in October – an increase of 7.8% from 51,000 new home sales in September.
By product type, conventional loans composed 63.6% of applications for new home sales, while FHA loans composed 26.3%, RHS/USDA loans 0.3% and VA loans 9.8%.
The average loan size for a new home decreased from $397,550 in September to $390,225 in October.
Photo: Alexander Andrews