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Mortgage applications for new-home purchases decreased 25.2% in December on a year-over-year basis, according to the Builder Application Survey (BAS) conducted by the Mortgage Bankers Association (MBA). On a month-over-month basis, applications decreased 5% in December.

“December new-home purchase activity—both for applications and estimated sales—ran more than 20% behind [2021's] pace,” says Joel Kan, MBA’s vice president and deputy chief economist. “The decline in activity was in line with single-family housing starts that were 32% lower than a year ago. Higher mortgage rates and a weakening economy held back buyers at the end of last year.”

Based on data from the BAS, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 641,000 units in December. The estimate is derived using mortgage application information from the BAS as well as assumptions regarding market coverage and other factors, according to the MBA. The estimate for December represents a 2.9% decrease from the November pace. On an unadjusted basis, MBA estimates there were 45,000 new-home sales in December, an 8.2% month-over-month decline.

“This week’s builder sentiment index from the NAHB reflected an improving outlook and increased buyer traffic, as mortgage rates have backed off from recent highs,” Kan says. “The housing market is still in need of more starter and entry-level homes, especially when current demographic trends point to the potential for more younger households to enter homeownership in the near future. New construction of these units will help these buyers entering the housing market.”

According to the MBA, conventional loans composed 69.1% of loan applications in December, FHA loans composed 20%, RHS/USDA loans composed 0.3%, and VA loans composed 10.5%. The average loan size of new homes increased to $399,555 in December from $392,465 in November.

The MBA’s BAS tracks application volume from mortgage subsidiaries of home builders. From the data collected, MBA is able to provide an early estimate of new-home sales volumes at the national, state, and metro level.