With inventory for existing homes consistently running well behind historical norms, homebuyers are increasingly pivoting to buying a newly built home instead.
According to a new report from the Mortgage Bankers Association, mortgage applications for new home purchases increased in August, rising 9% over July.
This marks the first time since March that the new demand for new homes has risen. In each of the last four months before August, new home demand fell.
That streak ended in August. However, new home demand is still running behind where it was last year, with demand falling 17% from August 2020 to August 2021.
But there was plenty of positive news in August’s data, according to Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
"Mortgage applications to purchase new homes were down in August compared to 2020's late summer surge, but both mortgage applications and MBA's estimate of new home sales jumped last month compared to July," Kan said.
"While the new home construction market is a much smaller segment of the overall housing market, prospective buyers are increasingly turning to new homes because of the very low levels of existing homes for sale,” Kan continued. “Last month's non-seasonally adjusted 9% increase in applications is an indication of greater than expected strength in demand, given that summer's end is typically a slower period for new home purchases."
While interest in new homes seems to be increasing, so do new home prices. According to Kan, the average loan size for a new home purchase application in August was higher than it’s ever been.
“Higher costs for materials, delivery delays, and growing labor shortages continue to pose as challenges and are ultimately pushing sales prices higher,” Kan said. “The average loan size set another survey record at $406,922, and the share of loan applications for amounts greater than $400,000 accounted for over 40% of all applications, up from 28% a year ago."
Nevertheless, demand for new homes was up in August.