New-home sales post biggest annual gain since July

New-home sales saw their largest year-over-year increase since July in November, even as mortgage rates changed little.  

While the industry is still waiting on official data from the Census Bureau regarding the pace of new home sales, the MBA's latest Builder Application survey found new-home purchase activity was up 3.1% from a year ago, but down 7% from October on an unadjusted basis.

"Mortgage rates have remained in a narrow range, and inventories of both new and existing homes on the market have increased," said Mike Fratantoni, the MBA's chief economist, in a press release Tuesday. "Potential buyers have more homes to choose from, and this removal of supply constraints is leading to a stronger sales pace."

The 30-year fixed mortgage rate rose to 6.22% in the first week of November and ended the month at 6.23%, according to Freddie Mac. It currently rests at 6.22%, increasing three basis points despite the Federal Open Market Committee dropping the federal funds rate by 25 basis points last week.

Actively listed homes rose 12.6% in November compared to the same time last year, the 25th consecutive month of year-over-year gains. But November inventory is still 11.7% below 2017-2019 levels, according to Realtor.com.

The drop from October to November in new-home sales is not nearly as steep on a seasonally adjusted basis, a decrease of 2.1% from a pace of 771,000 units. On an unadjusted basis, there were 51,000 new home sales last month, down 7.3% from the 55,000 in October, the MBA said.

The MBA also estimates new single-family home sales, which has been a leading indicator of the U.S. Census Bureau's New Residential Sales report, ran at a seasonally adjusted annual rate of 755,000 units last month. This number was derived from the survey and assumptions regarding market coverage, the press release said.

By product type, conventional loans lost some of its share of applications last month, dropping to 49.5% from 51.9%. 

Department of Veterans Affairs-guaranteed loans and Federal Housing Administration loans each saw their shares rise to 12.7% and 37.1%, from 12.3% and 35.1%, respectively. U.S. Department of Agriculture-backed loans maintained its share of 0.7%.

The average loan size for new homes also decreased to $378,063 from $381,404 in October, perhaps providing a slight boost to activity.

"New homebuyers continue to look for ways to extend their purchasing power or lower monthly payments, with 37 percent of new homebuyers using a mortgage choosing an FHA loan, and 24% choosing an ARM loan," Fratantoni said.