New-home loan applications surge to three-month high

Mortgage applications for new-home purchases accelerated in July, as borrowers took advantage of homebuilder concessions and a drop in interest rates, according to new industry data.

New single-family residential mortgage applications rose 6.8% year over year last month, according to the Mortgage Bankers Association. The increase coincided with greater overall mortgage activity in the back half of July, as borrowers took advantage of declining rates and a surplus of inventory. 

"Purchase activity for new homes strengthened in July as both mortgage applications and estimated new home sales reached their highest levels since April 2025," said Joel Kan, MBA vice president and deputy chief economist, in a press release.

While applications kept heading higher, the pace slowed from June's 8.5% jump. Month to month, new-home mortgage applications increased 7%, according to MBA's non-seasonally adjusted data. 

The combination of downwardly trending interest rates and increasing inventory levels lifted the fortunes of builders' lending affiliates and "likely helped to improve affordability," according to the MBA. 

"Many builders are still offering concessions to buyers," Kan continued. 

While a boost to the lending community, the pivot toward buyer concessions doesn't necessarily represent the same positive news to the bottom line for homebuilders, who are still facing adverse impacts of a sluggish housing market currently compounded by tariff worries. Over one-third of companies offered price cuts earlier this summer leading to greater construction industry pessimism, the National Association of Home Builders previously reported. 

Anticipated new-home sales surge, while lending amounts shrink

Home price concessions contributed to lower average July loan sizes, which came in at $372,745, the MBA reported. The mean amount maintained its decreasing summertime trend, shrinking 0.9% from June's $376,077. The latest number also represents an annual 5.2% fall from $393,344 in July 2024.  

July activity, though, led to an updated seasonally adjusted annual rate for new single-family home sales of 685,000. The estimate climbed higher by 2.7% from June's 667,000 units.

Last month saw approximately 58,000 sales of new single-family homes, with the total increasing 5.5% from June's 55,000. 

Conventional lending products accounted for almost exactly half of all the loans in July, taken out by 50.1% of applicants, up from 50% in June but narrowing from the 60.1% portion one year ago. 

The share of new-home loans backed by the Federal Housing Administration made up 35.3%. As existing-sales inventory diminished and became less affordable this decade, the FHA share of new-construction borrowing surged in response over the past several months, providing glimmers of opportunity for lenders. The lower-balance loans are frequently used by first-time buyers. 

July's FHA portion increased from 35.1% a month earlier and 29.1% from July 2024, which, at the time, was the largest share in over 10 years.

Meanwhile, new-home applications backed by other government lending programs similarly saw borrower activity grow from last year. 

Applications backed by the Department of Veterans Affairs represented 13.4% of total volume, dropping from 13.8% in June. A year ago, VA loans accounted for only a 10.4% share.  

U.S. Department of Agriculture-sponsored mortgages made up 1.2%, relative to the number of July applications. While the share remained the same as what was reported in June, it surged from 0.4% a year ago.