While denial rates for conventional mortgage loans have decreased nationwide, the racial gap has slightly widened.
Adobe Stock/Brian Jackson

Mortgage applications for new-home purchases increased 39.7% compared with a year ago, according to the October data from the Mortgage Bankers Association (MBA) Builder Application Survey (BAS). Compared with September, applications increased by 6%.

“Purchase activity for newly constructed homes continued its upward climb in October with purchase applications up 40% compared to a year ago, the ninth consecutive month of annual growth,” says Joel Kan, MBA’s vice president and deputy chief economist. “Home builders have been able to temper this high-rate environment by offering buyers rate buydowns and other incentives.”

MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 715,000 units last month. The seasonally adjusted estimate for October is an increase of 12.8% from the September pace of 634,000 units.

On an unadjusted basis, MBA estimates that there were 55,000 new-home sales in October, an increase of 7.8% from 51,000 new-home sales in September.

By product type, conventional loans composed 63.6% of applications, FHA loans composed 26.3%, RHS/USDA loans composed 0.3%, and VA loans composed 9.8%. The average loan size for new homes decreased from $397,550 in September to $390,225 in October.

“The FHA share of applications increased to 26%, the highest share since the survey began in 2013, as more first-time home buyers turn to the new-home market for more options and as some builders start to build more starter homes,” adds Kan.

Halfway through November, the 30-year fixed-rate mortgage (FRM) averaged 7.44%, down from 7.5% the week prior, according to Freddie Mac’s Primary Mortgage Market Survey. A year ago at this time, the 30-year FRM averaged 6.61%.

“For the third straight week, mortgage rates trended down, as new data indicates that inflationary pressures are receding,” says Sam Khater, Freddie Mac’s chief economist. “The combination of continued economic strength, lower inflation, and lower mortgage rates should likely bring more potential home buyers into the market."