Mortgages for new single-family homes fell sharply in June as lending activity cooled significantly after months of strong interest.
Applications for new homes fell 16% from May, without seasonal adjustment, marking the first decline so far in 2024, according to the Mortgage Bankers Association's Home Builder Applications Survey. Compared to the same period a year ago, applications were broadly flat, but still increased 0.7%, marking the 17th consecutive month of increases.
By comparison, a survey of homebuilders in May showed monthly applications were up 1% from the previous month and up 13.8% annually. The data is compiled from the mortgage lending subsidiaries of U.S. homebuilders.
“Applications for new home purchases slowed in June, which is consistent with overall declines in single-family home construction and new building permits, as well as typical seasonal patterns,” Joel Kang, MBA vice president and deputy chief economist, said in a press release.
New single-family home sales have been a bright spot over the past two years in a market where rising interest rates have discouraged existing homeowners from selling. The latest MBA report follows other recent data releases that have shown declines in new single-family home starts and sales during the late spring/early summer period (which typically marks the end of the busiest buying season), all of which have combined to dampen previous momentum.
Kang said the decline in mortgage rates in June did not help boost the new home market: “MBA's new home sales forecast points to a monthly decline of 626,000 units, the slowest pace in four months.”
The June figure was 10.8 percent lower than May's seasonally adjusted annual sales of 702,000 units, which was the highest since last fall.
A total of 52,000 new homes were sold last month, 17.5% lower than the 63,000 sold in May.
The share of properties financed with loans guaranteed by the Federal Housing Administration rose to 28.7 percent from 26.5 percent in May, the highest level in the survey's history. “First-time buyers continue to make up an increasing share of demand for new homes,” Kang said.
The previous record share of FHA new-home mortgages, which are often used by first-time homebuyers, was 27.1% in November of last year.
Among other types of government-sector loans, applications for Department of Veterans Affairs guarantees accounted for 10.2% of volume in June, while mortgages guaranteed by the U.S. Department of Agriculture made up 0.3%.
Traditional applications accounted for 60.8% of the total, down from 63.4% the previous month.
The average loan amount for a new single-family home fell below $400,000 in June to $399,879. That marked the second consecutive month of declines and was down more than 0.1 percent from $400,150 in May.