Mortgage News for the Week of September 14, 2018
Lower Priced Homes Driving New Home Sales

While applications for financing new home purchases declined in August, the Mortgage Bankers Association (MBA) is predicting a bump in the month's new home sales.  The MBA's Builder Applications Survey (BAS) data for August show mortgage applications for new home purchases decreased 2.0 percent from applications in July and were down 4.6 percent compared to August 2017. This change does not include any adjustment for typical seasonal patterns.

Based on the information from the BAS as well as assumptions regarding market coverage and other factors, MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 669,000 units during the month. This is a 5.0 percent improvement over the July pace of 637,000.  The MBA estimates that 53,000 new homes sold during the month on an unadjusted basis.

"Our seasonally-adjusted estimate of new home sales increased five percent over the month,the second straight monthly increase. Low inventory of homes for sale has been an issue this year, and newly constructed units have been one way to ease the shortage. Growth in August was focused in the lower price tiers. In fact, for the first time in four months, monthly growth was driven by the lower half of the market, based on application size," said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.

Applications for conventional loans composed 71.4 percent of the total received and 15.6 percent were for FHA-backed mortgages.  VA loans accounted for 11.8 percent and RHS/USDA loans for 1.2 percent. The average loan size of new homes decreased from $337,775 in July to $332,801 in August.

MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country and uses the data to provide an early estimate of new home sales volumes at the national, state, and metro level. Official new home sales estimates are conducted by the Census Bureau and the Department of Housing and Urban Development on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.  The official sales report for August will be released on September 26.
Mortgage Rate Update

house and graph The one-two punch of strong job and consumer credit growth drove mortgage rates up to their highest mark since August 2.

Mortgage rates are currently 0.82 percent higher than a year ago, which is the biggest year-over-year increase since May 2014. Looking ahead, annualized comparisons for mortgage applications may look weaker than they appear, but that's primarily because of the large spread between mortgage rates now and last September, which was when they reached their low for the year.

Overall, this spectacular stretch of solid job gains and low unemployment should help keep home buyer interest elevated. However, mortgage rates will likely also move up, as the Federal Reserve considers short-term rate hikes this month and at future meetings.
Information and analysis is obtained through and is deemed reliable but not guaranteed. is not an affiliate of Philadelphia Mortgage Advisors.  Philadelphia Mortgage Advisors is a licensed mortgage lender by the PA Dept. of Banking and Securities, NJ Dept. of Banking & Insurance, the state of DE, the Florida Office of Financial Regulation, MD Mortgage Lender #23004 and VA State Corporation Commission #MC - 6797. NMLS #128570.

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