April New Home Purchase Mortgage Apps Decreased 12%

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for April 2020 shows mortgage applications for new home purchases decreased 12 percent compared from a year ago. Compared to March 2020, applications decreased by 25 percent. This change does not include any adjustment for typical seasonal patterns.

“New home purchase applications severely weakened in April, which coincided with the peak of the social distancing efforts and restrictions on non-essential activities to help slow the spread of COVID-19. During what’s typically the prime home buying season, activity fell 25 percent from March and decreased 12 percent from a year ago,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “MBA estimates that new home sales dropped to an annualized pace of 533,000 units – the slowest since December 2016. This decline was in line with data from our Weekly Applications Survey, which indicated a pullback in March and most of April.”

Added Kan, “There’s evidence now that unrealized, pent-up demand is being released as states start to reopen. We expect that heading into the summer, more prospective homebuyers will gradually return to the market.”

MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 533,000 units in April 2020, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

The seasonally adjusted estimate for April is a decrease of 23.5 percent from the March pace of 697,000 units. On an unadjusted basis, MBA estimates that there were 51,000 new home sales in April 2020, a decrease of 28.2 percent from 71,000 new home sales in March.

By product type, conventional loans composed 62.0 percent of loan applications, FHA loans composed 23.3 percent, RHS/USDA loans composed 1.2 percent and VA loans composed 13.5 percent. The average loan size of new homes decreased from $344,556 in March to $334,641 in April.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.