Demand for newly constructed homes continues to remain high as existing for-sale inventory remains historically low. Mortgage applications for new home purchases increased 20.6% in August on a year-over-year basis.

Compared to July 2023, applications increased by 4%. This change does not include any adjustment for typical seasonal patterns.

MBA’s survey tracks application volume from mortgage subsidiaries of homebuilders across the country. 

“Despite the 30-year fixed rate averaging over 7% in August, applications for new home purchase loans increased over the month and from a year ago,” said Joel Kan, MBA’s vice president and deputy chief economist.

The FHA share of applications dipped slightly in August but remained high, noted Kan. It indicates that a larger share of first-time homebuyers are active in the new home sales market.

“Our estimate of new home sales showed a 4% increase to the strongest pace of sales in three months at 702,000 units,” he added.

According to MBA estimates, new single-family home sales were running at a seasonally adjusted annual rate of 702,000 units in August  2023. It’s up 3.7% from the July pace of 677,000 units. On an unadjusted basis, MBA estimates that there were 59,000 new home sales in August 2023, an increase of 5.4% from 56,000 new home sales in July. 

By product type, conventional loans made up 65.8% of loan applications. Meanwhile, FHA loans comprised 23.8% of total loan applications while VA loans were 10.2%. The average loan size for new homes increased to $398,092 in August from $397,148 in July.

However, the 7% mortgage rates and reduced housing affordability pushed down the homebuilder’s confidence index, which fell to 50 in August. In July, the sales pace of new homes climbed 4.4% compared to June, reaching a seasonally adjusted annual rate of 714,000.