Mortgage applications for new home purchases increased 10.9 percent in May over a year ago, according to the Mortgage Bankers Association’s builder application survey released Tuesday.
Applications also increased 26 percent over April, MBA said.
“The solid increase in new home purchase applications in May is another indication of a recovery in the housing market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “MBA estimates that new home sales rebounded 26 percent last month – a healthy turnaround after three months of declines.”
MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 672,000 units in May 2020, based on data from the survey. The new home sales estimate is derived using mortgage application information from the survey, as well as assumptions regarding market coverage and other factors.
The seasonally adjusted estimate for May is an increase of 26.1 percent from the April pace of 533,000 units. On an unadjusted basis, MBA estimates that there were 65,000 new home sales in May 2020, an increase of 27.5 percent from 51,000 new home sales in April.
Conventional loans composed 62.5 percent of loan applications, FHA loans composed 24.5 percent, RHS/USDA loans composed 1.2 percent and VA loans composed 11.8 percent. The average loan size of new homes decreased from $334,641 in April to $332,793 in May.
“Homebuyer traffic is rising, and homebuilders are continuing to ramp up production following the COVID-19 pandemic-related restrictions,” Kan said. “We expect to see additional near-term strength in the coming months from the resumption of delayed sales activity caused by the social distancing and stay-at-home orders during March and April.”