New-home mortgage app volume rises as price growth slows, rates drop

Lower interest rates and slower price growth helped to boost mortgage applications to purchase newly constructed homes during May, the Mortgage Bankers Association said.

"Purchase activity strengthened in May, with new-home mortgage applications and our estimate of new-home sales both showing increases compared to a year ago, at 20% and 15%, respectively," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The average loan size for new-home applications decreased almost 3%, signaling the ongoing moderation in home prices and a shift to building lower-priced homes. Declining mortgage rates and more new entry-level supply are good news for the housing market this summer."

Compared with April, mortgage applications for newly constructed homes increased by 0.1%. The application volume data is not seasonally adjusted.

New-home sales were running at a seasonally adjusted annual rate of 727,000 units, the MBA estimated using mortgage data from its Builder Application Survey, as well as assumptions regarding market coverage and other factors. This is a 0.7% increase from April's pace of 722,000 units.

On an unadjusted basis, new-home sales totaled an estimated 69,000, unchanged from April.

During May 2018, new-home sales hit a seasonally adjusted annual rate of 626,000 units; on an unadjusted basis, 60,000 new homes sold during the month.

Average loan size for a new home decreased to $330,311 in May from $338,754 in April and $337,515 for May 2018.

Approximately 69.4% of new-home purchasers sought conventional mortgages, with 17.9% applying for Federal Housing Administration financing. Veterans Affairs-guaranteed mortgages made up 12% of this market while U.S. Department of Agriculture Rural Housing Service loan applications were at 0.7%.