Mortgage applications for new homes surged in January as a lack of existing homes continued to fuel the demand for new construction.
Mortgage applications for new home purchases rose 19.1% in January on a year-over-year basis, the 12th consecutive month with an annual increase. Applications were up 38% from the previous month, according to the Mortgage Bankers Association (MBA) Builder Application Survey for January.
According to MBA estimates, new single-family home sales were at a seasonally adjusted annual rate of 700,000 units in January, the highest pace since October 2023. The pace was up 16.9% from December’s rate of 599,000 units.
“Applications for new home purchases were strong in January, as newly built homes remained an attractive option for prospective homebuyers who looked to take advantage of lower mortgage rates during the month,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
In January, conventional loans accounted for 64.5% of loan applications for new homes. Federal Housing Administration (FHA) loans accounted for 24.8% of applications, U.S. Department of Veteran Affairs (VA) loans took a 10.3% share and U.S. Department of Agriculture (USDA) loans accounted for 0.4%.
The average loan size for new homes decreased to $401,282 in January, down from $405,368 in December.
Homebuilders are feeling optimistic about the spring buying season. Homebuilder confidence shot up to a five-month high in February, according to the National Association of Home Builders’ most recent survey.
MBA’s survey tracks new home mortgage application volume from mortgage subsidiaries of homebuilders across the country.
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