New-home originations crippled by elevated rates in July

New-home purchase originations notably fell in July as mortgage rates climbed during the month.

Applications for newly built homes slowed 5.7% year over year, according to the Mortgage Bankers Association's monthly builders survey. Compared to June's increased activity, volumes dropped 1% on an unadjusted basis.

"Purchase activity for newly built homes slowed in July, with both applications to purchase and the estimated number of new home sales falling behind last year's pace," said Joel Kan, the MBA's vice president and deputy chief economist, in a press release Thursday."

The annualized new single-family home sales pace, which has been a leading indicator of the U.S. Census Bureau's New Residential Sales report, decreased in three of the last four months. At 647,000 units, it fell below the average rate of 664,000 units during the first six months of the year, according to the report.

The seasonally adjusted calculation for July also declined 3% from the June pace of 667,000 units. The MBA estimated there were 54,000 new home sales last month on an unadjusted basis, a 3.6% drop from 56,000 in June.

The average loan size for new homes decreased from $375,218 in June to $374,438 in July as well.

By product type, conventional loans made up 50% of loan applications, Federal Housing Administration loans composed 34.6%, Rural Housing Service and U.S. Department of Agriculture loans accounted for 1.8% and Department of Veterans Affairs loans totaled 13.6%, according to the survey.

"With new-home inventory still elevated, weaker demand likely reflects increased homebuyer sensitivity to higher mortgage rates," Kan said.

The 30-year fixed-rate mortgage started July at 6.43%, increasing every week to 6.66% by the end of the month. The 30-year rate fell slightly last week, but still came in at 6.67%, according to Freddie Mac.

An opportunity for buyers

New listings of homes for sale rose 1.2% week over week to their highest level in more than three months during the four weeks ending Aug. 16, a Redfin report showed. It also found pending home sales fell 1.3% on a weekly basis to their lowest level since March.

The uptick in new listings and slow demand could provide an opportunity for house hunters, as there were an estimated 51.3% more sellers than buyers in the market last month, just short of December's peak of 51.8% and up from 47.9% in June, according to a different Redfin report.