New home applications fall 3% as mortgage rates top 6.5%

Mortgage applications for new home purchases rose 3.8% year over year in May but fell 3% from April, according to the Mortgage Bankers Association (MBA)’s Builder Application Survey, released Thursday. The figures are not seasonally adjusted.

New home purchase activity softened during the month, with the MBA estimating new home sales at a seasonally adjusted annual rate of 642,000 units in May, down 2% from April’s pace of 655,000.

“New home purchase activity slowed in May, with MBA’s estimate of new home sales declining to 642,000 units,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “Even as home builders continue to offer concessions to increase sales, homebuyers have been hesitant because of higher prices, increased economic uncertainty, and mortgage rates averaging over 6.5% in May.”

On an unadjusted basis, MBA estimated 58,000 new home sales in May, down 3.3% from 60,000 in April.

The survey uses mortgage application data from homebuilder subsidiaries, along with market assumptions, to produce early estimates of new home sales ahead of the U.S. Census Bureau’s official report.

By loan type, conventional loans accounted for 49.6% of applications. Federal Housing Administration (FHA) loans were 35.6% of applications, U.S. Department of Veterans Affairs (VA) loans were 13.7% and U.S. Department of Agriculture (USDA) loans were 1.1%.

The average loan size declined from $378,384 in April to $372,825 in May.

“The average loan size to purchase a new home was at the lowest level in 10 months at $372,825, consistent with government loans accounting for more than half of applications for the fifth consecutive month,” Kan said.

This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.