New home mortgage apps break slump, rise on sliding rates

Sliding mortgage rates at the beginning of the year drove applications for new home purchases in January up 42% from the prior month, according to the Mortgage Bankers Association.

The application activity is slightly down from the same time last year, dipping 3.5% compared to January 2022, according to the MBA's Builder Application Survey published Friday. The monthly gain in January was also a break from a prolonged slump in new home mortgage applications to close the year. The data is not seasonally adjusted.

"The 30-year fixed rate declined almost 40 basis points over the month and this stirred some homebuyers to act, especially those who might have delayed their purchase when mortgage rates were higher," said Joel Kan, MBA vice president and deputy chief economist, in a press release.

Mortgage rates fell in January amid news of lower inflation and bottomed out at 6.09% to end the week of Feb. 2, before trending up following the Federal Reserve's latest interest rate hike and a strong jobs report. 

The MBA also estimates new single-family home sales in January running at a seasonally adjusted annual rate of 725,000 units, a 13.1% rise from December's rate. Unadjusted, the MBA estimated 63,000 new home sales in January compared to 45,000 in December. 

U.S. Census Bureau data on new residential construction was sluggish in January, Kan said. Home builders are also bracing for a difficult year given slow-moving sales of already-occupied properties and unfavorable media reports, according to the National Association of Home Builders. Fannie Mae last month recommitted to its prediction of a modest recession in the first half of this year, with a significant projected drop in originations through 2023.

"Additionally, home buyers remain sensitive to mortgage rates, which have trended higher in recent weeks and could delay a potential turning point in the housing market," Kan said. 

The average loan size of new homes in January was $401,631, a small bump from December's average of $399,555. Among those mortgages, 68.4% were conventional loans, according to the MBA, followed by the share of Federal Housing Administration loans at 20.3%, U.S. Department of Agriculture mortgages at 0.3%, and Department of Veterans Affairs loans accounting for 11% of activity.