New construction is having its time in the sun.
Applications for new-home purchases jumped 22.2% in December 2023 compared to a year ago, according to data from the Mortgage Bankers Association (MBA) Builder Application Survey (BAS) released this past Thursday.
This marks the 11th consecutive year-over-year lift in new-home purchase applications.
“The low level of existing homes for sale continues to divert prospective buyers to newly built homes,” Joel Kan, MBA’s vice president and deputy chief economist, said in a news release. “Compared to November 2023, applications were down 4 percent on a non-seasonally adjusted basis, consistent with December declines for the past two years.”
New-home sales fell 11.5% in December compared to November’s pace of 677,000 units on a seasonally adjusted level, the MBA survey found.
Conventional loans accounted for 64.5% of new-home mortgage applications. Meanwhile, FHA, VA and USDA loans comprised 25.1%, 9.9.% and 0.5%, respectively, of new-home purchase applications, the MBA reported.
With building costs still elevated, the average loan size for newly built homes jumped to $405,368 in December, up from $390,049 in November, according to MBA data.
Single-family housing starts jump 15.8% year over year in December
Builders faced some challenges in 2023 that led to fewer housing starts in December but the outlook for 2024 is looking up, according to a new report from the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
December saw 1.46 million housing starts, a 4.3% decline from November, HUD and the Census Bureau found.
“The December reading of 1.46 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months,” according to the report.
Despite the overall dip, lower mortgage rates at the end of the year helped push construction of single-family homes to 1.03 million units on a seasonally adjusted annual rate in December. That’s up 15.8% from a year ago, but down 8.6% from November.
Multifamily starts of condos and apartment buildings climbed 8% to a 433,000 annualized pace in December, according to the report.
Housing starts data show promising signs for 2024
Overall, total housing starts ended 2023 at 1.41 million, down 9% from 2022’s total of 1.55 million. Single-family and multifamily starts totaled 945,000 (down 6%) and 469,000 (down 14.4%), respectively, from a year ago.
“Mortgage rates steadily fell below 7% in December, and lower rates combined with a lack of existing inventory in most markets helped to keep single-family production above a one million-unit annual pace,” Alicia Huey, chairman of the National Association of Home Builders (NAHB), said in a statement reacting to the joint report. “And the fact that our latest surveys showed a big increase in builder confidence is an indicator that we can expect housing starts to improve in the coming months.”
The outlook for new-home building in the year ahead is generally positive — with some headwinds thrown into the mix.
“Moderating mortgage rates are expected to provide a boost to new home construction in 2024, but an uptick in building material prices and a shortage of buildable lots and skilled labor are serious challenges for home builders,” Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis, said in a statement.
She added, “A rise in single-family permits is a sign that we will see the single-family market pick up steam in the near future. However, due to tighter financing, the multifamily market will weaken.”
