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Mortgage applications to purchase new homes fell 16% month over month in June but rose 0.7% year over year, according to a report released Thursday by the Mortgage Bankers Association (MBA).
The data, derived from the trade group’s survey of homebuilders, is “consistent with broader declines in single-family construction and new building permits as well as typical seasonal patterns,” according to Joel Kan, vice president and deputy chief economist at the MBA.
According to Kan, MBA’s estimate of new-home sales showed a monthly decline to a seasonally adjusted annual pace of 626,000 units — the slowest in four months. To compare, MBA estimated that sales of new single-family homes in May reached an annual rate of 702,000.
By loan type, conventional mortgages continued to comprise the majority of applications for new homes, accounting for 60.8% of the total in June.
Notably, Federal Housing Administration (FHA) loans gained market share, rising from 26.5% of applications in May to 28.7% in June “as first-time buyers continue to account for a growing share of demand for newly built homes,” according to Kan.
U.S. Department of Veterans Affairs (VA) loans accounted for 10.2% of the total in June and U.S. Department of Agriculture (USDA) loans accounted for 0.3%.
Last month’s average loan size across all types of new-home applications was $399,879, down from $400,150 in May.
The same decline in demand has been apparent in the existing-home market. Convincing borrowers to take a new mortgage to purchase a home has been challenging with rates still in the 7% range.
In the week ending July 12, purchase applications were down 3% from the prior week and declined 14% from a year ago. Meanwhile, refinance loans rose 15% weekly and 37% yearly.
According to HousingWire‘s Mortgage Rates Center, the average 30-year conforming loan rate was 7.01% on Thursday, a decline from 7.11% a week earlier. The 15-year conforming loan rate has shown an even more significant pullback, falling from 6.94% to 6.65% during the week.
“Signs of cooling inflation and the increased likelihood of the Federal Reserve cutting rates this fall should cause mortgage rates to move lower, which would be welcome news to prospective homebuyers who may be unwilling, or unable, to jump into the housing market at today’s costs,” Bob Broeksmit, MBA president and CEO, said in a statement.
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