Mortgage Applications Up From September, Down YOY

Mortgage applications for new home purchases fell 15.2% year-over-year (YOY) in October but increased 6% month-over-month (MOM), according to the Mortgage Bankers Association’s (MBA) latest Builder Application Survey.

The increase from September puts MBA’s estimate of new home sales at its strongest pace since January 2021.

“Purchase activity continues to be dominated by higher loan balance transactions, which pushed the average new home loan size up to over $412,000, another new record in the survey,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. 

“Recent U.S. Census data show an increasing share of new sales are for homes yet to be built or still under construction, and a shrinking share of completed homes. Housing demand remains strong, and buyers are making quick decisions in a still very competitive market.”   

MBA estimated that single-family houses ran at around 897,000 units in October, a 6.4% increase from September. On an unadjusted basis, MBA estimates that there were 68,000 new home sales in October 2021, a 3% increase MOM.

Conventional loans made up 75.7% of loan applications, followed by FHA loans (13.5%), VA loans (10.3%), and RHS/USDA loans (0.5%). The average loan size rose to $412,339 from $408,522 MOM.

“Homebuilders still face delays and challenges from supply-chain bottlenecks and rising costs. Overall construction costs, as measured by the Producer Price Index (PPI), recorded an annual increase of 12.3% in October, which is almost five times the average annual change,” Kan noted.

The price of lumber hit an all-time high of more than $1,500 per thousand board feet in May and, though it dropped slightly over the summer, has been rising again. The National Association of Homebuilders has asked the Biden administration to focus on labor and construction materials in its efforts to increase affordable housing.

A recent study from real estate tech firm Knock found that median new home prices have outstripped median household income, potentially pricing a majority of Americans out of newly constructed homes.

“To put things in perspective, the minimum total household income for a mortgage on a $390,900, with a 6% down payment, typically falls just under $80,000,” the report reads. “At this level, nearly 60% of U.S. households would not be eligible.”