Loan applications for newly constructed properties accelerated going into this year’s peak home buying season, contrasting with the weakness seen in the market a year ago, according to the Mortgage Bankers Association.
New-home purchase applications for March were up 7% year-over-year, and rose by 19% compared to the previous month, according to MBA’s Builder Application Survey. A year ago, higher year-over-year interest rates dampened demand for new-home loan applications, compared with March 2016 by almost 3%. The month-to-month increase at that time was 14%.
“The confluence of declining mortgage rates with the spring buying season is supporting stronger housing demand and activity,” Mike Fratantoni, senior vice president and chief economist at the MBA, said in a press release. “Additionally, the drop in average loan size suggests that builders are tilting production to lower-priced homes, which continues to see the tightest inventories and strongest home-price growth.”
Conventional loans continue to dominate mortgage applications submitted to builders in March, but the share of Federal Housing Administration-insured mortgages was slightly higher than it was a year ago.
In March, nearly 69% of builder applications were for conventional loans, almost 19% were for FHA loans and 12% were for mortgages insured by the Department of Veterans Affairs. Less than 1% of new-home purchase applications were for Rural Housing Service/U.S. Department of Agriculture products.
A year ago, more than 71% of applications submitted to builders were for conventional loans, more than 15% were for FHA loans and 12% were for VA loans. A little more than 1% of new-home loan applications were for RHS/USDA loans.
The average loan size for a new home during March fell to $331,794 from $340,692 in February. A year ago, the average loan size was $337,597.
The MBA’s numbers are based on a survey that tracks applications from mortgage subsidiaries of homebuilders.