July New Home Purchase Mortgage Apps Increased Year Over Year

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for July 2020 shows mortgage applications for new home purchases increased 39 percent compared from a year ago. Compared to June 2020, applications increased by 1 percent. This change does not include any adjustment for typical seasonal patterns.

“New home sales activity continued to rebound in July after a pandemic induced low point in April 2020. In fact, applications for new home purchases with home builder affiliates were 39 percent higher than in July 2019,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “On an unadjusted basis, new home sales were estimated to be up 14 percent over the year and showed year over year gains for the second consecutive month in July.”

Added Kan, “Typically, new home purchases peak in April and then decline through the remainder of the year. With the disruption this spring, seasonal patterns are not holding, and hence the seasonal adjustment is likely overstating the increase for this month. While this is a signal of still strong demand for housing, we remain concerned about supply. Housing starts have not kept up with demand and this could hold back the pace of sales in the coming months.”

MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 890,000 units in July 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 July is an increase of 15 percent from the June pace of 774,000 units. On an unadjusted basis, MBA estimates that there were 72,000 new home sales in July 2020, an increase of 1.4 percent from 71,000 new home sales in June.

By product type, conventional loans composed 67.2 percent of loan applications, FHA loans composed 20.6 percent, RHS/USDA loans composed 1.2 percent and VA loans composed 11 percent. The average loan size of new homes increased from $338,589 in June to $345,929 in July.

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.