New home sales are projected to fall in December relative to November, not an unexpected pattern as the year-end holidays approach.  The Mortgage Bankers Association (MBA) says its Builder Applications Survey (BAS) for the month shows applications for new home purchase mortgages dropped 14 percent from applications the previous month.  They were, however up 2 percent when compared to the previous December.  The changes are not adjusted for typical seasonal patterns.

Based on data from its survey, which is conducted among mortgage subsidiaries of home building companies, the MBA estimates that there were 35,000 new home sales in December 2016, a decrease of 14.6 percent from 41,000 new home sales in November.

On a seasonally adjusted basis MBA estimates new single-family home sales were running at an annual rate of 478,000 units in December, a decrease of 18.7 percent from the November pace of 588,000 units.

Lynn Fisher, MBA's Vice President of Research and Economics said, "Mortgage applications for new single family homes increased on a year over year basis in every month of 2016, with December displaying the thinnest margin over 2015.  However, growth in applications set a high benchmark in December 2015, and it is not yet clear if the recent rise in interest rates is having an impact on applications for new homes. Looking forward to 2017, MBA continues to forecast more than 10 percent growth in single family housing starts."

By product type, conventional loans composed 67.5 percent of loan applications and FHA loans 18.5 percent.  VA loans had a 13.1 percent share and RHS/USDA loans 0.9 percent. The average loan size of new homes increased from $329,389 in November to $331,354 in December.

In addition to information from the BAS, MBA incorporates assumptions about market coverage and other factors into its projections.  Official new home sales estimates are conducted monthly by the Census Bureau.  In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. The Census Bureau's new home sales estimates for December will be published on January 26.