That applications for mortgages to purchase newly constructed homes rose 30.8 percent in April compared to a year ago is not a particularly useful piece of data given the state the global economy was enduring in April 2021. However, it is good news that the Mortgage Bankers Association (MBA) estimates that new home sales are expected to increase by 8 percent when the April numbers are published.

MBA says its estimate of new home sales at an annualized rate of 770,000 units means an end to a two-month slump but, while strong, it is still below the 877,000 unit pace at the end of last year. Mortgage applications were also down month-over-month by 9 percent. The change in application volume does not include any adjustment for typical seasonal patterns.

Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "Purchase applications for new homes, unadjusted for typical seasonal patterns, declined in April, but the average loan size increased to its highest level in MBA's survey. The purchase market remains strong overall, but low housing inventory and accelerating home prices have started to adversely impact purchase activity. Additionally, homebuilders have reported significantly higher input prices, which is contributing to the ongoing rise in sales prices and average loan sizes." 

The seasonally adjusted 770,000 unit estimate for April is an increase of 7.8 percent from the March pace of 714,000 units.  On an unadjusted basis, MBA estimates that there were 72,000 new home sales in April 2021,unchanged from March. 

By product type, conventional loans accounted for 72.9 percent of loan applications while FHA loans had a 15.8 percent share. One percent of applications were for RHS/USDA loans and 10.3 percent were for VA loans. The average loan size of new homes increased from $374,353 in March to $377,434 in April.

MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of new home builders across the country.  This enables MBA to provide an early estimate of new home sales volumes at the national, state, and metro level and the types of loans used to buy them. Official new home sales estimates are conducted monthly by the Census Bureau at contract signing, which is typically coincident with the mortgage application. The next Census Bureau report will be issued on May 25.