Mortgage applications for new homes dropped 9% from January to February, but overall applications are still up 9.2% year-over-year for homebuilders, according to the latest report from the Mortgage Bankers Association.
MBA’s homebuilder application survey showed new, single-family home sales running at a seasonally adjusted annual rate of 748,000 units in February 2021 – down 17.3% from the January pace of 905,000 units, and the slowest annual pace since May 2020.
Total, MBA estimated that there were 65,000 new home sales in February 2021, down from 69,000 new home sales in January.
As has been the case for roughly a full calendar year, sky-high prices of building materials and, in turn, pricier new homes are keeping some buyers at bay. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said supply and demand imbalances are likely creating “bottlenecks” for homebuilders.
“The conventional share of applications hit a new high, as overall housing inventory levels remain extremely low and are pushing home prices higher,” he said. “Builders continue to be confronted with rising input costs and a lack of available lots, causing them to slow production.”
Conventional loans composed 74% percent of loan applications in February, per the report. FHA loans composed 15.4%, RHS/USDA loans made up 1.5% and VA loans composed 9%. The average loan size of new homes increased from $363,493 in January to $370,679 in February.
Even prior to the pandemic, housing inventory had hit record lows, and the problem has intensified as demand continues to rise. A December report from Homesnap showed total new listings increased .22% from 2019, while total sales increased 19.29% – an imbalance that has depleted housing stock.
Better times could be coming, though, as several COVID-19 vaccines continue circulating among the population. That should send more people back to work – including homebuilders and lumber mill employees, whose work stoppages in early 2020 due to health concerns crippled the housing industry.
Additional stimulus checks from President Joseph Biden’s American Rescue Plan should be hitting consumer bank accounts within the month, further stimulating the economy and encouraging prospective homebuyers to possibly make an offer or a down payment. However, mortgage rates are steadily climbing back above 3% after a record year of lows.
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