August saw the demand for new homes rise for the first time since March. However, it looks like August’s increase may have been an outlier, as a new report shows that new home demand declined in September.
According to a recent report from the Mortgage Bankers Association, mortgage applications for new home purchases fell by 4% in September compared to August 2021.
That decline marks the fifth time in the last six months that new home demand has fallen. As stated before, the only increase since March was in August.
August’s monthly increase was not enough to push new home demand above last year, a trend that continued in September. According to the MBA report, mortgage applications for new homes in September 2021 were 16.2% below September 2020.
However, MBA Associate Vice President of Economic and Industry Forecasting Joel Kan notes that the estimated pace of new home sales is at its “strongest since January 2021” thanks to the strong results seen in September, when new home sales rose to a six-month high.
"New home sales purchase activity was weaker in September, and the average loan size rose to another record high, as homebuilders continue to grapple with rising building materials costs and labor shortages,” Kan said.
“The survey-high average loan size of $408,522 is evidence of higher sales prices from these higher costs, as well as the shift in new construction to larger, more expensive homes," Kan added.
Broken down by loan type, conventional loans comprised 75.1% of loan applications for new homes in September, while FHA loans were 13.9%, RHS/USDA loans were 0.5%, and VA loans were 10.5%.