September's new-home mortgage apps suggest waning buyer interest

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While spiking from the year before, mortgage applications to purchase new homes fell in September from August, with low supply and high unemployment keeping it in check, according to the Mortgage Bankers Association.

New-home purchase application activity increased 38.2% year-over-year, but dropped 5% month-to-month. This falls in line with August's inflated annual growth coupled with short-term deceleration.

"Demand for newly built homes is strong, as many buyers appear to seek more space for work, in-home schooling and leisure," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "However, the moderation in the seasonally adjusted sales pace the last two months could mean that demand has slowed recently — likely because of tight inventory conditions and the slowing improvement in the job market."

On a seasonally adjusted basis, the annual rate of 869,000 sales in September edged down 0.2% from August's rate of 871,000 units. Unadjusted, the MBA estimated 67,000 new-home sales in September, a slight 1.5% decrease from August's 68,000.

While September activity fell from August, the average mortgage amount to buy a new home rose to $354,316 from $348,576 month-over-month and from $330,807 in September 2019.

By loan type, conventional mortgages made up 71.3% of the applications, up from 69% in August. Federal Housing Administration-insured loans fell to 17.8% from 19%, the share guaranteed by the Department of Veterans Affairs declined to 10.1% from 11% and Rural Housing Service/U.S. Department of Agriculture loans went to 0.8% from 1%.

Currently, lumber and labor shortages stand as obstacles to ramping up construction to meet demand. However, homebuilder sentiment — measured by the National Association of Home Builders/Wells Fargo Housing Market Index — climbed for the fifth consecutive month in September, reaching its highest level since tracking began in 1985.

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