The Mortgage Bankers Association (MBA) is predicting another strong month for new home sales. The association says its Builder Application Survey (BAS) data for July 2020 shows mortgage applications for new home purchases increased 39 percent compared to a year ago and is up 1 percent compared to June. This would be the second consecutive month of annual increases. This change does not include any adjustment for typical seasonal patterns.
Based on these results, as well as assumptions regarding market coverage and other factors, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 890,000 units in July. This is 15 percent higher than their June pace of 774,000. On an unadjusted basis, MBA estimates that there were 72,000 new home sales in July 2020, an increase of 1.4 percent from 71,000 new home sales in June.
"New home sales activity continued to rebound in July after a pandemic induced low point in April 2020," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Typically, new home purchases peak in April and then decline through the remainder of the year. With the disruption this spring, seasonal patterns are not holding, and hence the seasonal adjustment is likely overstating the increase for this month. While this is a signal of still strong demand for housing, we remain concerned about supply. Housing starts have not kept up with demand and this could hold back the pace of sales in the coming months."
By product type, conventional loans accounted for 67.2 percent of loan applications and FHA loans for 20.6 percent. Eleven percent of applications were for VA backed loans and RHS/USDA loans composed 1.2 percent of the total. The average loan size of new homes increased from $338,589 in June to $345,929 in July.
MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application. The Census Bureau will release data on July sales on August 25.