The market for newly built homes cooled again in May following April’s thaw, the Mortgage Bankers Association (MBA) revealed Tuesday.
Mortgage applications for new home purchases fell 4.5% year over year in May, according to the MBA’s builder application survey. Compared to April’s volume, applications were down 9%.
May’s disappointing homebuyer turnout follows an April upswing that saw new-home mortgage applications rise 2% from the previous month and 5.3% from the prior year, as buyers took advantage of pricing pressures on a glut of unsold inventory.
Joel Kan, MBA’s vice president and deputy chief economist, said in a statement that several factors likely combined to suppress demand for newly built homes.
“Economic uncertainty, rising mortgage rates and increasing competition from growing existing-home sales inventory likely dampened overall demand for new-home purchases in May,” Kan stated. “Applications to purchase newly built homes fell to their slowest pace in three months as buyers held off on their purchase decisions.”
MBA estimates there were about 631,000 new single-family homes sold in May at a seasonally adjusted annual rate. That is a 12.1% decline from April’s pace of 718,000 units.
On an unadjusted basis, the association estimates there were 58,000 new home sales last month, a 10.8% decrease from the 65,000 new homes sold in April.
The average loan size for new homes increased from $376,992 in April to $379,209 in May, according to MBA data.
In terms of loan types, MBA reports conventional loans comprised 47.3% of total applications in May. Federal Housing Administration loans accounted for 37.8% of mortgage applications last month, Department of Veterans Affairs loans made up 13.8% of total volume and U.S. Department of Agriculture loan programs rounded out the remaining 1% of the mix.
