The Mortgage Bankers Association’s (MBA) Builder Application Survey (BAS) showed mortgage applications for new home purchases decreased in June 2021, falling for the third consecutive month. Not including any adjustment for typical seasonal patterns, the applications decreased by 23.8 percent year-over-year, and by 3 percent month-over-month.
“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,” Joel Kan, MBA associate vice president of economic and industry forecasting, said in a release. “This has dampened new home sales and quickened home-price growth.
“Additionally, still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers,” he added. “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.”
According to the BAS, new single-family home sales ran at a seasonally adjusted annual rate of 704,000 units in June 2021, compared with the May pace of 741,000 (a 5 percent decrease). On an unadjusted basis, the association estimated 66,000 new home sales in June, compared with 68,000 the month before (a 2.9 percent decrease).
“The average pace of sales has remained strong at around 738,000 for the past three months, but it is still around 7 percent lower than the average for 2020,” Kan said. “Last year was strongest year for new home sales in over a decade.”
When broken down by product type, conventional loans composed 74.4 percent of loan applications, Federal Housing Administration loans accounted for 14 percent, Department of Veterans Affairs composed 10.6 percent, and Rural Housing Service/United States Department of Agriculture accounted for 1 percent. The average loan size increased from $384,323 in May to $392,370 in June.