New-build home mortgage applications skyrocketed in June

While social distancing measures drastically reduced mortgage applications for new-construction homes in April, potential buyers have since returned to the market, creating a spike in new-home purchase applications in June, the Mortgage Bankers Association said.

The number of consumers seeking mortgages to buy new homes was up 54.1% compared to a year ago and up 20% from May, according to the MBA's Builder Application Survey.

"Although this is not adjusted for seasonal impacts, it is another piece of data indicating that home-buying activity that was delayed by the pandemic in March and April is just being realized later in the season," Joel Kan, associate vice president of economic and industry forecasting, said in a press release. "The fact that applications are up over 50% from last June further reinforces that point."

New single-family home sales ran at a seasonally adjusted annual rate of 774,000 units in June, based on MBA estimates. That increased 15.2% from May and the strongest level of activity since January's SAAR pace of 865,000 units.

On an unadjusted basis, 71,000 new homes sold in June, a 9.2% climb from 65,000 during May. Only 58,000 new homes sold in June 2019.

"We do anticipate that new-home construction will speed up to attempt to better meet demand," Kan said. "With the low level of homes for sale on the market, the sustainability of the upward trend in home purchase activity will hinge on supply ramping up more rapidly."

By product type, conventional loans composed 65.1% of loan applications, while Federal Housing Administration-insured loans made up 22.6%. Buyers seeking Veterans Affairs-guaranteed mortgages occupied an 11.2% share, while the remaining 1% fell to U.S. Department of Agriculture Rural Housing Program loans.

The average loan size of a new home rose to $338,589 in June from $329,593 year-over-year and $332,793 in May.