New Home Mortgage Applications Spike 33 Percent in October

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Based on the Mortgage Bankers Association's latest Builder Application Survey data for October 2020, U.S. mortgage applications for new home purchases increased 32.9 percent compared from a year ago. Compared to September 2020, applications increased by 5 percent. This change does not include any adjustment for typical seasonal patterns.

"New home sales activity was robust in October, with mortgage applications for new home purchases increasing almost 33 percent compared to October 2019, and 5 percent from last month," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "October is usually when home buying activity slows as the weather turns colder. However, this fall has been a different story, with delayed activity from the spring, and more households seeking larger homes with more indoor and outdoor space, driving demand. Additionally, the average loan size in October increased to $355,684, a new survey high since 2013."

Added Kan, "MBA's October estimate for new home sales is a 7 percent increase to 927,000 units - the highest seasonally adjusted pace in the survey. These results are in line with the U.S. Census Bureau's reported 6 percent gain in October single-family housing starts. Homebuilders are boosting production based on strong current activity and sales expectations." 

MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 927,000 units in October 2020, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.  

The seasonally adjusted estimate for October is an increase of 6.7 percent from the September pace of 869,000 units. On an unadjusted basis, MBA estimates that there were 70,000 new home sales in October 2020, an increase of 4.5 percent from 67,000 new home sales in September.   

By product type, conventional loans composed 71.8 percent of loan applications, FHA loans composed 17.6 percent, RHS/USDA loans composed 0.8 percent and VA loans composed 9.9 percent. The average loan size of new homes increased from $354,316 in September to $355,684 in October.