In a promising turn of events for the real estate market, October showcased a robust surge in mortgage applications for new-home purchases. According to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS), the figures are not only impressive compared to last year but also reflect a notable uptick from September’s statistics.
Upward Momentum:
Joel Kan, MBA’s vice president, and deputy chief economist reports a remarkable 40% increase in purchase applications for newly constructed homes compared to the previous year. This marks the ninth consecutive month of annual growth, highlighting the resilience of the market. Despite the challenging high-rate environment, home builders have adeptly managed the situation by offering enticing incentives, including rate buydowns.
Sales Figures and Projections:
MBA estimates that new single-family home sales reached a seasonally adjusted annual rate of 715,000 units in October, exhibiting a significant 12.8% increase from the September pace of 634,000 units. On an unadjusted basis, October saw 55,000 new-home sales, a notable 7.8% rise from the previous month’s figures.
Loan Composition and Average Sizes:
Breaking down the mortgage application landscape, conventional loans dominated, comprising 63.6% of applications, followed by FHA loans at 26.3%, RHS/USDA loans at 0.3%, and VA loans at 9.8%. Interestingly, the average loan size for new homes witnessed a decrease, going from $397,550 in September to $390,225 in October.
Rise of FHA Applications:
Joel Kan notes a significant shift, highlighting that the FHA share of applications increased to 26%, the highest since the survey’s inception in 2013. This rise is attributed to an influx of first-time homebuyers turning to the new-home market for expanded options, coupled with builders strategically focusing on constructing more starter homes.
Mortgage Rates and Market Outlook:
As we reach mid-November, the 30-year fixed-rate mortgage (FRM) averaged 7.44%, a slight decrease from the previous week’s 7.5%. This marks the third consecutive week of declining mortgage rates, with Sam Khater, Freddie Mac’s chief economist, expressing optimism. Lower inflation, combined with economic strength and reduced mortgage rates, is anticipated to draw more potential homebuyers into the market.
Conclusion:
October’s surge in new-home mortgage applications paints a promising picture for the real estate landscape. With builders navigating challenges and offering attractive incentives, coupled with favorable mortgage rate trends, the market seems poised for continued growth. As we look ahead, the real estate sector anticipates sustained momentum, providing opportunities for both buyers and builders alike.
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