New home buying apps drop nearly 11% in April

Mortgage Bankers Association (MBA) Building Applications Survey (BAS) data for April 2022 shows that mortgage applications for the purchase of new homes are down 10.6% from last year. a year ago. Month over month, mortgage applications were down 14% (this change does not include any adjustment for typical seasonal trends).

MBA estimates that sales of new single-family homes occurred at a seasonally adjusted annual rate of 701,000 units in April 2022.

The MBA’s new home sales estimate is derived from BAS mortgage application information, as well as assumptions about market coverage and other factors.

“New home buying activity declined on a monthly and annual basis in April as soaring mortgage rates cooled demand, and homebuilders continued to grapple with rising costs, supply chain issues and extended completion times,” said MBA Partner Joel Kan. Vice President of Economic and Industrial Forecasting. “With the supply of existing homes on the market still at extremely low levels, the new home market is an important source of housing supply. However, the pace of construction has slowed in recent months. MBA’s estimate of new home sales fell for the fifth straight month to 701,000 units, the slowest pace of sales since May 2020.”

The National Association of Home Builders (NAHB) recently reported in its Home Building Geography Index (HBGI) that the year-over-year growth rate of single-family construction in the regional urban, suburban and rural submarkets of small and large metropolises slowed in the first quarter. -over one year, with a notable deceleration in the major suburban markets.

Additionally, the NAHB also reported a significant decline in builder confidence in the market for newly built single-family homes, which fell eight points to 69 in May, marking the fifth consecutive month that builder sentiment declined to its lowest level since June. 2020.

The MBA’s BAS said the seasonally adjusted estimate for April is a decrease of 6.8% from March’s pace of 752,000 units. On an unadjusted basis, the MBA estimates that there were 65,000 new home sales in April 2022, down 12.2% from 74,000 new home sales in March.

“The average loan size increased to a new high of $436,576, and more than half of the applications were for loan amounts over $400,000,” Kan said. of the market. »

Freddie Mac said the 30-year fixed rate mortgage (FRM), while sliding over the past few weeks, still remains above the 5% mark, causing even more affordability issues for many potential buyers.

By product type, conventional loans accounted for 76.7% of loan applications, while FHA loans accounted for 13.1%, RHS/USDA loans 0.2%, and VA loans 10.1%.

In terms of average loan size, new homes increased by more than $400 month-over-month, from $436,151 in March to $436,576 in April 2022.

However, Redfin reports that more sellers are feeling the pressure to sell and have resorted to lowering the price of their homes amid rising interest rates and mounting affordability concerns. More than one in five sellers surveyed by Redfin have lowered their price, the highest rate since October 2019.

“The surge in mortgage rates led to a sudden and significant slowdown in the housing market in May,” said Chen Zhao, head of economic research at Redfin. “However, mortgage rates are now stabilizing and housing supply remains tight, so while we expect house price growth rates to decline, we don’t expect prices to fall much in the future. National level. For homebuyers trying to figure out the best time this year, the main benefit of waiting is that there may be less competition as supply begins to pile up.

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