Mortgage apps for new home purchases dropped 6% in August

MBA: Drop seasonally driven

Mortgage applications for new home purchases decreased by 6% relative to the previous month, according to the latest Mortgage Bankers Association’sBuilder Application Survey.

This change does not include any adjustment for typical seasonal patterns.

“As the summer winds down, mortgage applications for new homes saw a seasonally-driven decrease in August,” said Lynn Fisher, MBA’s vice president of research and economics. “However, applications for new homes were still up 19% relative to the same month last year, which is consistent with what we’ve seen so far in 2015.”

By product type, conventional loans composed 68.5% of loan applications, Federal Housing Administration loans composed 19%, Rural Housing Service/Department of Agriculture loans composed 0.9% and Veteran’s Affairsloans composed 11.6%. The average loan size of new homes increased from $316,995 in July to $317,035 in August.

Some normally optimistic analysts found the report troubling.

“The first quarter’s recovery in mortgage applications for home purchase appears to have been derailed by a lack of earnings growth and the resulting deterioration in affordability,” says Matthew Pointon, property economist for Capital Economics. “While earnings should pick-up, rates are also poised to rise, suggesting that it may take some time before we can declare that the recovery in mortgage applications is complete.

“With mortgage rates poised to rise and house prices set for further gains, the outlook for mortgage applications could therefore be bleak. Set against that, however, we expect earnings to start to pick- up. And with the pace of rate rises set to be gradual and affordability still favorable by past standards, we are hopeful that the earlier recovery in applications will resume over the next few months,” he said.

The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 524,000 units in August 2015, 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 August is a decrease of 1.9% from the July pace of 534,000 units. On an unadjusted basis, the MBA estimates that there were 41,000 new home sales in August 2015, a decrease of 6.8% from 44,000 new home sales in July.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.

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