Mortgage applications for new-home purchases remain up on a yearly basis, but August marked a notable fall from the summer's first two months, new industry data showed.
New-home purchase activity rose 1% compared with last year, but applications decreased by 6% from July, according to the Mortgage Bankers Association's Builder Application Survey. August's climb was the smallest increase since February's 6.9% drop and a sizable difference from June's 8.5% and
Despite growing inventory and mortgage rates reaching their lowest point since April last month, borrowers in general failed to flock to the market, as
"The bright spot in the August results was that estimated new home sales increased for the third consecutive month," MBA's Vice President and Deputy Chief Economist Joel Kan said in a press release Tuesday, noting that this was the strongest sales pace in over a year.
The MBA estimates new single-family home sales, a consistent leading indicator of the U.S. Census Bureau's New Residential Sales report, hit 730,000 on a seasonally adjusted basis last month, a 6.6% increase from July's pace of 685,000 units. The estimation is calculated using mortgage application information from the survey, assumptions of market coverage and other factors.
On an unadjusted basis, the MBA estimates there were 56,000 new home sales in August, down 3.4% from 58,000 in July.
Loan product breakdowns for apps on new construction
For the third straight month, conventional lending products accounted for nearly half of applications on newly-constructed homes last month, taken out by 49.9% of applicants. That represented a drop from 50.1% in July and 59.7% a year ago.
The Federal Housing Administration insured 35.6% of these applications in August, near July's 35.1% but fairly higher than the 29.6% from August 2024.
Prospective Department of Veterans Affairs-guaranteed loans made up 13.4% of loan applications for new homes, up from 10.2% a year ago. VA applications accounted for 13.8% the month prior.
The U.S. Department of Agriculture backed 1.2% of loan applications in this market segment, the same as July but more than double the 0.5% from last year.
With inventory increasing, the average loan size for an application on a new home remained low and is nearing depths unreached in years.
"Housing inventory levels continue to grow, which has given prospective homebuyers more buying options and continues to reduce sales price pressures," Kan said. "The average loan size remained below $380,000 for the fifth consecutive month and was close to 2021 levels."
