While it looks like homebuying may have picked up in June, new data shows that increase may have been felt only in the sales of existing homes.
A new report from the Mortgage Bankers Association shows that mortgage applications for new home purchases were down by 3% in June compared to May.
The decline is much more pronounced when looking at a year-over-year comparison. According to the MBA, new home purchase applications were down 23.8% from June 2020 to June 2021.
However, it should be noted that 2020 was the best year for new home sales in more than 10 years. So, while the decline is notable, the numbers are falling from last year’s abnormally high levels.
According to the MBA, the decline is being felt most significantly by those looking for a starter home or one at a lower price.
"Homebuilders are encountering stronger headwinds of late, as severe price increases for key building materials, rising regulatory costs, and labor shortages impact their ability to raise production,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
“This has dampened new home sales and quickened home-price growth," Kan continued. “Additionally, still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers.”
According to Kan, June was the third straight month that new home purchase applications have fallen. Beyond that, the average loan amount for a new home hit another record high of $392,370.
“In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances,” Kan said.
However, as Kan noted, the average pace of new home sales has “remained strong” for the last three months, indicating that the appetite for new homes is certainly still there.