October's new-home mortgage apps up over 30%, bucking usual fall trend

October's mortgage application activity for newly constructed homes increased on a month-to-month basis for the first time since July, defying the typical seasonal drop-off in these transactions, the Mortgage Bankers Association said.

The group's Builder Application Survey found a 5% increase in volume over September and a 32.9% increase compared with October 2019. Furthermore the average loan size recorded — $355,684 — is the highest in the survey since 2013. The application data is not seasonally adjusted.

"October is usually when home buying activity slows as the weather turns colder," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "However, this fall has been a different story, with delayed activity from the spring, and more households seeking larger homes with more indoor and outdoor space, driving demand."

By product type, conventional loans composed 71.8% of new-home loan applications. Among government loans, Federal Housing Administration-insured mortgages made up 17.6%, Veterans Affairs-guaranteed were 9.9% of applications, while the U.S. Department of Agriculture Rural Housing Service had a 0.8% share.

The MBA estimated October's new single-family home sales ran at a seasonally adjusted annual rate of 927,000 units, the highest pace in the survey's history. This was a gain of 6.7% over September's 869,000.

On an unadjusted basis, MBA estimated that there were 70,000 new-home sales in October, an increase of 4.5% from 67,000 new-home sales in September.

"These results are in line with the Census Bureau's reported 6% gain in October single-family housing starts. Homebuilders are boosting production based on strong current activity and sales expectations," Kan said.

In its latest origination forecast, the MBA is predicting 972,000 SAAR single-family housing starts this year, up from 893,000 in 2019. It projects that to grow to 1.12 million in 2021, 1.16 million in 2022 and 1.2 million in 2023.

The MBA predicts that new-home sales will number a SAAR of 839,000 this year, up from 685,000 one year ago. Over the three years, new-home sales are expected to increase to 960,000 then 980,000 and 997,000 in 2023.