While new home sales have been performing well over the last few months, the Mortgage Bankers Association (MBA) expects a stumble in December. Its Builder Application Survey (BAS) data for the month shows mortgage applications for new home purchases decreasing 5.0 percent compared to November and by 7.1 percent from December 2020. This change does not include any adjustment for typical seasonal patterns.
Based on the BAS and other assumptions such as market coverage, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 887,000 units in December. This is a decline of 2 percent from November’s 905,000 unit pace. On an unadjusted basis, there were an estimated 60,000 new home sales in December, down 7.7 percent from 65,000 units in November.
“Applications to buy a new home slowed in December, while the activity remained tilted to higher-priced homes,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Supply chain challenges, labor shortages, and higher materials costs also contributed to last month’s decline, as projects were delayed or cost more to complete. The average loan size set another survey record at $423,102, as these higher building costs are pushing sales prices higher.”
By product type, conventional loans composed 77.2 percent of loan applications, FHA loans composed 12.6 percent, RHS/USDA loans composed 0.4 percent and VA loans composed 9.8 percent. The record average loan size cited by Kan is an increase from $414,114 in November.
MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. The Census Bureau report for December will be released on January 23.