Mortgage financing apps for new homes up 33% compared to last year

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Monthly application volumes for lenders financing purchases of newly built homes are still a lot stronger than they were last year, though they're down slightly on a consecutive-month basis.

In August, applications for loans on newly built houses were up 33% year-to-year but down 4% month-over-month, according to the Mortgage Bankers Association. In comparison, builder loan applications in July were 39% higher year-over-year 1% higher on a consecutive-month basis.

The loan product mix in August was similar to July's with a slightly higher share of conventional loans dominating applications at 69% compared to 67% the previous month.

The percentage of Federal Housing Administration-insured loans was down slightly at 19% compared to 21% in July. The percentage of loans guaranteed by the Department of Veterans Affairs was roughly the same at 11%. The share of Rural Housing Service/U.S. Department of Agriculture loans remained at 1%.

Loan applications for new homes have staged a remarkable turnaround this year after falling 25% month-over-month and 12% year-to-year due to the coronavirus' impact in April.

Lenders put construction-loan funding on hold early in the course of the pandemic because they weren't sure about the outlook for building activity at the time. But once construction stays were broadly lifted the market got back on track, said Laura Brandao, president of American Financial Resources.

Brandao said the dip in August is likely an anomaly, and she expects low rates and consumer demand to continue to fuel gains in application volume into the fall. However, she did note that there are builder supply shortages that could slow construction timelines.

"Right now there's certainly a lot of activity and certainly lots of interest. I don’t see it letting up," she said. "The biggest dilemma isn’t so much the families looking to build, it's the struggle for materials and labor."

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