It's simple: There aren't enough new homes on the market to meet current demand.
This is evidenced in the National Association of Realtors (NAR's) recent Aging Homes Analysis report, which shows that more than 70% of U.S. single-family homes were built before 1990, while 60% of 2013 sales year-to-date were for homes built before 1990. Due in large part to the financial crisis and subsequent decline in new construction, America's housing stock is getting older.
While new homes tend to be pricier than old ones – the average price of a home built after 1990 is currently $256,292, while the average price for a home built before 1990 is $233,221, according to NAR – they are currently high in demand, as inventories remain low in most areas of the U.S. This is because the construction market is struggling to keep up with demand, due to a lack of skilled labor and the rising cost of both labor and materials.
According to the Mortgage Bankers Association's (MBA) Builder Application Survey, applications for new home purchases increased by 11%, on an unadjusted basis, in October compared to September.
About 40,000 new homes were sold in the U.S. in October, according to the report. These new home purchases were funded using a mix of products – conventional loans composed 67.5% of loan applications, Federal Housing Administration loans composed 17.8%, Rural Housing Service/U.S. Department of Agriculture loans composed 0.9% and Veteran's Affairs loans composed 13.8%.
For 2013, a total of 509,000 new homes had been sold as of October, according to the MBA.
The average loan size for new homes increased from $289,650 in September to $294,480 in October, according to the MBA's report.
The top three states for new home purchase application volume in October were Texas, Florida and California – which also happen to be among the top states for new home construction. Mortgage applications for new home purchases in those states increased by 9.5%, 9.3% and 4.6% respectively, in October compared to September, according to the report.
Earlier this week, the MBA reported that overall mortgage application volume decreased 1.8% for the week ending Nov. 8, compared to the previous week. Application volume has been a steady decline since mid-year, when mortgage interest rates began to tick up.
New home sales, however, have been booming: According to the U.S. Census Bureau's most recent New Residential Sales report, new home sales rose 7.9% in August compared to July. As of Nov. 15, the Census had not yet released its new homes sales data for September, which was due to be published on Oct. 24, but was likely delayed due to the government shutdown earlier that month. To access the Census Bureau's most current new home sales data, click here.