Homebuyers are continuing to turn to new construction as the antidote for a continued lack of existing homes for sale.
Mortgage applications for newly built homes jumped 15.7% in February from a year ago, according to data from the Mortgage Bankers Association’s (MBA) latest Builder Application Survey.
While new-home mortgage applications only rose 1% from January, it’s clear that competition is spurring homebuyers to consider new homes even as mortgage rates fluctuate.
“New home purchase activity in February was slightly hampered by the rise in mortgage rates over the month. However, homebuyers kept up their demand despite how competitive the purchase market still is, driving the level of applications to 16 percent ahead of last year’s pace,” said Joel Kan, MBA’s vice president and deputy chief economist.
The average loan size for new-home mortgages rose to $406,000 in February, up from $401,282 in January—and the highest level since March 2023, the MBA reported. But that’s still well under the survey’s record-high loan size for new homes of $436,000 logged in April 2022.
The estimated sales pace notched 689,000 units in February, down slightly by 1.7% from January’s 700,000 units. On an unadjusted basis, 62,000 new-home sales closed in February, slipping 1.6% from 63,000 sales the month prior, the MBA reported.
Conventional loans comprised the majority of new-home mortgage applications at 63.9% in February. The Federal Housing Administration (FHA) loan share of activity jumped to 25.7%; U.S. Department of Veterans Affairs (VA) loans for military borrowers accounted for 10.1% of new-home loan applications; and loans guaranteed by the U.S. Department of Agriculture (USDA) for rural homebuyers made up just 0.3% of activity.
