Mortgage demand for newly built homes declined in May though remained above year-ago levels, the Mortgage Bankers Association (MBA) said Thursday.
Application volumes for new-home mortgages have been choppy this spring as affordability pressures have constrained homebuying demand. Mortgage rates have risen sharply since the start of the war with Iran in late February, eroding purchasing power.
Single-family construction momentum has withered amid escalating inflation and souring outlooks among U.S. home builders adjusting to persistently slow buyer demand.
After an 11% yearly rise in March, April’s new-home purchase application volumes saw their first annual decline since October, dropping 10% below March levels.
Applications declined further in May, sliding 3% below April levels though notching a 3.8% annual gain.
“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,” explained Joel Kan, deputy chief economist at the MBA, in commentary accompanying Thursday’s release.
Government loan programs with more flexible qualification criteria accounted for more than half of new-home mortgage applications for the fifth consecutive month. The government-backed share is split between the Federal Housing Administration at 35.6%, the Department of Veterans Affairs at 13.7% and the U.S. Department of Agriculture at 1.1%.
Average loan size for new-home mortgages hit its lowest level in 10 months in May at $372,825, which Kan called “consistent with” the elevated government mortgage share.
The MBA, which estimates single-family new-home sales ahead of official government reporting, said the seasonally adjusted annual pace of new-home sales declined 2% from April to land at 642,000 units from 655,000 the previous month. That reflects a projected 3.3% decline from the 60,000 new homes sold in April to 58,000 in May.
The U.S. Census Bureau and the Department of Housing and Urban Development reported in late May that the annual pace of new-home sales was closer to 622,000 in April, the most recent month for which government figures are available.
