MBA: New Home Purchase Mortgage Applications Up 22.1% in April

In April 2024, the Mortgage Bankers Association (MBA) reported a 22.1% year-over-year increase in mortgage applications for new home purchases, with a 2% rise from March 2024. Joel Kan, MBA’s Vice President and Deputy Chief Economist, highlighted that this growth follows a brief slowdown in March and reflects a sustained demand for new homes, partly driven by factors like builder concessions and customization options. Notably, first-time homebuyers are becoming a more significant portion of the market, with FHA applications rising to 26.3%, significantly above the historical average of 18%. MBA’s estimate of new home sales reached a seasonally adjusted annual rate of 699,000 units in April, marking the highest pace in three months and a 13.7% increase from March.

The survey data also revealed that the average loan size for new homes slightly increased to $405,490 in April. Conventional loans comprised 62.8% of applications, FHA loans 26.3%, RHS/USDA loans 0.3%, and VA loans 10.5%. MBA’s Builder Application Survey, which gathers data from mortgage subsidiaries of home builders, provides early estimates of new home sales and loan types used by buyers, complementing the U.S. Census Bureau’s monthly new home sales data. In April, unadjusted new home sales were estimated at 62,000, a 3.3% rise from March’s 60,000.

Market May Gain 4 Million New Buyers This Year

The U.S. housing market could gain 4 million new buyers this year if mortgage rates drop by one percentage point, according to the National Association of Home Builders (NAHB). At present, high mortgage rates and soaring home prices make homeownership unaffordable for many Americans. At a 7.25% mortgage rate, 27.5 million households can afford the median-priced new home. However, if the rate decreases to 6.25%, an additional 4.5 million households could afford homes, increasing the total to 32 million. The potential rate drop depends on the Federal Reserve’s actions to control inflation. The housing market is also constrained by a shortage of approximately 1.5 million housing units.

High mortgage rates and escalating home prices have dampened the housing market, affecting the broader economy. Only 21% of Americans currently believe it is an excellent time to buy a home, as home prices surged by 6.38% in February. Some areas, like Florida, have seen a decrease in buyer demand despite rising prices. Experts like John Boyd and Alan Chang do not expect significant mortgage rate cuts soon, with Chang noting that the real estate market’s current challenges will likely persist through the peak spring and summer seasons. The market might not see meaningful relief until 2025, as inflation remains high and interest rates are not expected to drop significantly during the election year.

Analyst: 20% Home Down Payment Not Mandatory, Reveals Actual Payments

In the first quarter of 2024, the average down payment for buying a home was 13.6%, with a median payment of $26,000, according to a report from Realtor.com. While these figures show an increase from the previous year, they are still below the 20% down payment often seen as standard for home purchases. Experts emphasize that the 20% threshold is not mandatory, citing various reasons buyers may opt for lower down payments, such as affordability challenges or the desire to lessen monthly mortgage payments.

Danielle Hale, chief economist at Realtor.com, highlights that nearly 40% of Americans without homes cite a lack of savings for a down payment as a barrier to homeownership. Despite rising home prices, it’s noted that buyers have options beyond the traditional 20% down payment. For instance, programs like VA loans and USDA loans offer opportunities for 0% down payments, while FHA loans require as little as 3.5% down for qualifying borrowers. However, it’s essential to consider the potential drawbacks of smaller down payments, such as higher monthly mortgage costs and the possibility of private mortgage insurance (PMI), which adds extra expenses.