Lower Priced Homes Driving New Home Sales

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While applications for financing new home
purchases declined in August, the Mortgage Bankers Association (MBA) is
predicting a bump in the month’s new home sales.  The MBA’s Builder
Applications Survey (BAS) data for August show mortgage applications for new
home purchases decreased 2.0 percent from applications in July and were down
4.6 percent compared to August 2017. This change does not include any
adjustment for typical seasonal patterns.

Based on the information from the BAS as well as
assumptions regarding market coverage and other factors, MBA estimates new
single-family home sales were running at a seasonally adjusted annual rate of
669,000 units during the month. This is a 5.0 percent improvement over the July
pace of 637,000.  The MBA estimates that
53,000 new homes sold during the month on an unadjusted basis.

“Our seasonally-adjusted estimate of new home
sales increased five percent over the month, the second straight monthly
increase. Low inventory of homes for sale has been an issue this year, and
newly constructed units have been one way to ease the shortage. Growth in
August was focused in the lower price tiers. In fact, for the first time in
four months, monthly growth was driven by the lower half of the market, based
on application size,” said Joel Kan, MBA Associate Vice President of Economic
and Industry Forecasting.

Applications for conventional loans composed 71.4
percent of the total received and 15.6 percent were for FHA-backed
mortgages.  VA loans accounted for 11.8
percent and RHS/USDA loans for 1.2 percent. The average loan size of new homes
decreased from $337,775 in July to $332,801 in August.

MBA’s Builder Application Survey tracks
application volume from mortgage subsidiaries of home builders across the
country and uses the data to provide an early estimate of new home sales
volumes at the national, state, and metro level. Official new home sales
estimates are conducted by the Census Bureau and the Department of Housing and
Urban Development on a monthly basis. In that data, new home sales are recorded
at contract signing, which is typically coincident with the mortgage
application.  The official sales report for
August will be released on September 26.

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