MBA Expects December Decline in New Home Sales

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New home sales are projected to fall in
December relative to November, not an unexpected pattern as the year-end
holidays approach.  The Mortgage Bankers
Association (MBA) says its Builder Applications Survey (BAS) for the month shows
applications for new home purchase mortgages dropped 14 percent from
applications the previous month.  They
were, however up 2 percent when compared to the previous December.  The changes are not adjusted for typical
seasonal patterns.

Based on data from its survey, which is conducted
among mortgage subsidiaries of home building companies, the MBA estimates that
there were 35,000 new home sales in December 2016, a decrease of 14.6 percent
from 41,000 new home sales in November.

On a seasonally adjusted basis MBA estimates new
single-family home sales were running at an annual rate of 478,000 units in
December, a decrease of 18.7 percent from the November pace of 588,000 units.

Lynn Fisher, MBA’s Vice President of Research and
Economics said, “Mortgage applications for new single family homes increased on
a year over year basis in every month of 2016, with December displaying the
thinnest margin over 2015.  However,
growth in applications set a high benchmark in December 2015, and it is not yet
clear if the recent rise in interest rates is having an impact on applications
for new homes. Looking forward to 2017, MBA continues to forecast more than 10
percent growth
in single family housing starts.”

By product type, conventional loans composed 67.5
percent
of loan applications and FHA loans 18.5 percent.  VA loans had a 13.1 percent share and
RHS/USDA loans 0.9 percent. The average loan size of new homes increased from
$329,389 in November to $331,354 in December.

In addition to information from the BAS, MBA
incorporates assumptions about market coverage and other factors into its
projections.  Official new home sales
estimates are conducted monthly by the Census Bureau.  In that data, new home sales are recorded at
contract signing, which is typically coincident with the mortgage application. The
Census Bureau’s new home sales estimates for December will be published on
January 26.

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