While home builders still have the summertime blues, prospective homebuyers are starting to pick up good vibrations from easing mortgage rates.
Mortgage applications for new home purchases rose 7% month over month in July and 6.8% from a year ago, according to builder application survey data released Monday by the Mortgage Bankers Association (MBA). The gains came amid a backdrop of modest interest-rate relief, with the 30-year fixed-rate mortgage averaging 6.72% in July versus 6.82% in June, according to Freddie Mac.
“Applications were boosted by borrowers looking to take advantage of slightly lower mortgage rates during the month and higher levels of newly built inventory,” Joel Kan, MBA’s vice president and deputy chief economist, noted in a press release. “This likely helped to improve affordability, as many builders are still offering concessions to buyers.”
Around 62% of home builders offered some form of concession in July, according to survey data from the National Association of Home Builders (NAHB) and Wells Fargo. That figure increased to 66% in August, with 37% of builders reporting price cuts.
While those perks may have coaxed some trepidatious homebuyers off the fence, builders have been far less cheery this summer. The NAHB/Wells Fargo Housing Market Index, which gauges home builder confidence on a 100-point scale, fell to a grim score of 32 in August after mustering just a 33 reading in July.
But the MBA estimates that seasonally adjusted new single-family home sales reached 685,000 in July following June’s pace of 667,000 units. On an unadjusted basis, the association’s estimate of 58,000 units sold in July would be a 5.5% increase from June’s 55,000 mark.
Conventional loans accounted for roughly half of July’s mortgage applications for new home purchases. Federal Housing Administration loans comprised a 35.3% share, Veterans Affairs loans accounted for 13.4% and the remaining 1.2% came from U.S. Department of Agriculture loan programs.
The average loan size for new homes fell from $376,077 in June to $372,745 in July, according to the MBA.
