There's plenty of demand for new, single-family homes; however, there aren't that many around to buy because developers still think it's too risky to build. The lack of available inventory, in turn, has pushed prices up, resulting in an affordability problem.
As a result of this and rising interest rates, applications for mortgages for new home purchases decreased about 4% on an unadjusted basis in July compared to June, according to the Mortgage Bankers Association's (MBA) Builder Application Survey (BAS).
‘Mortgage applications to home builder subsidiaries for new homes declined at a rate in line with the slowdown observed in the overall purchase mortgage market,’ says Lynn Fisher, vice president of research and economics for the MBA, in a release. ‘This was driven, in part, by an increase in interest rates relative to earlier in the spring. Nonetheless, the number of builder applications was still up 15 percent compared to a year ago.’
The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 534,000 units in July. On an adjusted basis, this is a 7.7% increase compared to the June pace of 496,000 units.
On an unadjusted basis, the MBA estimates that there were 44,000 new home sales in July, a decrease of 2.2% from 45,000 new home sales in June.
Looking at applications for new home purchases by loan type, about 63.4% of applications in July were for conventional loans, while 18.8% were for Federal Housing Administration loans, 12.9% were for Veterans Affairs loans and about 4.9% were for Rural Housing Service/U.S. Department of Agriculture loans.
The average loan size for a new home decreased from $321,678 in June to $316,995 in July, according to the MBA.