July's new-home sales were at their highest pace since April, leading to a 3.5% year-over-year increase in mortgage applications to purchase recently constructed homes, the Mortgage Bankers Association said.
There was a 0.2% increase compared with June, the MBA's Builder Application Survey found.
Home sales reached a seasonally adjusted annual pace of 637,000 units in July, up 8.5% from June's 587,000. In April, the pace was 656,000 units, while in July 2017, the pace was 562,000.
"This was likely supported by the May surge in housing starts and is a reflection of the strength of demand due to the healthy economy," Joel Kan, the MBA's vice president of economic and industry forecasting, said in a press release. "Because inventory of existing homes remains quite tight, this increase in new home supply will be welcomed by the market."
The average loan size for these applications increased to $337,775 in July from $333,033 in June — the lowest since August 2017 — and $329,483 in July 2017.
By product type, 72.1 % of new-home buyers applied for a conventional loan mortgage. Applications for Federal Housing Administration-insured loans totaled 15.3% of July's activity, with Veterans Affairs-guaranteed financing making up 11.4%. Rural Housing Service/U.S. Department of Agriculture loans composed 1.1%.
The new-home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors, the MBA said. Government data for July is expected on Aug. 23. In June, there was the slowest pace of new-home purchases in eight months, at a 631,000 annualized rate.
Homebuilder confidence about the market was at its lowest level for the year in July, according to the National Association of Home Builders/Wells Fargo Housing Market Index. However, the component that measures prospective buyer traffic was at its highest level since February.