Mortgage applications for new-home purchases in October decreased 28.6% compared with a year ago, according to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS). On a month-over-month basis, applications decreased 13% in October.
“New-home purchase activity weakened on a monthly and annualized basis in October, as the sharp jump in mortgage rates to nearly 7% reduced both overall demand and the purchasing power for many prospective buyers,” says Joel Kan, MBA’s vice president and deputy chief economist. “The average loan size decreased to $400,616, down 8% from its peak in April 2022.”
Conventional loans comprised 68.6% of loan applications, while FHA loans comprised 20.1%, and VA loans accounted for 11% of loan applications in October.
Kan says the moderation in loan amounts is attributable to the slower home price growth and buyers stepping away from higher-priced homes. In addition to declining mortgage applications in the month, the MBA’s estimate of the seasonally adjusted annual rate of new-home sales also decreased in October, falling 6.1% on a month-over-month basis to 598,000 units, the slowest annualized pace since July 2022.
The MBA’s new-home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. On an unadjusted basis, the MBA estimates there were 47,000 new-home sales in October, a 9.6% decline from 52,000 new-home sales in September.