The Mortgage Bankers Association (MBA) is predicting another decline in new home sales. The Association's Builder Application Survey (BAS) for May found a 5.9 percent decrease in applications for new home purchase mortgages compared to a year earlier. Compared to April 2021, applications were down 9 percent. This change does not include any adjustment for typical seasonal patterns.

Based on the application data, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 741,000 units in May. This estimate is 3.8 percent lower than April's annual pace of 770,000 units.  On an unadjusted basis, MBA estimates that there were 68,000 new home sales in May 2021, a decrease of 5.6 percent from 72,000 new home sales in April. 

"Mortgage applications to purchase a new home decreased in May for the second straight month, while the average loan size, at $384,000, increased for the fourth consecutive month and reached a new survey high," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Loan balances continue to rise because of a larger share of sales in the higher end of the market, as well as increased sales prices from strong demand and elevated building material costs."  

Add Kan, "MBA's estimate of new home sales showed that the seasonally adjusted annualized pace of sales dropped 4 percent drop in May. Since reaching a survey-high 927,000 units in October 2020, the annual pace of has now fallen around 20 percent, weighed down by low housing inventory and rising prices.

Applications for conventional loans accounted for 73.9 percent of the total and FHA loans had a 14.8 percent share. RHS/USDA loans and VA loans comprised 0.9 percent and 10.4 percent, respectively. The average loan size of new homes increased from $377,434 in April to $384,323 in May.

MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA provides an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are published 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 will issue its May report on June 23.