Mortgage demand for new homes is down 6.9% in the past year

Mortgage applications for new-home purchases fell 6.9% year over year in February, according to data from the Mortgage Bankers Association (MBA)’s Builder Application Survey that was released Thursday.

Applications edged up 0.3% from January without taking seasonal adjustments into account.

“New home purchase activity strengthened in February, in line with seasonal patterns, as higher housing inventory and declining rates supported growth,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “However, applications to purchase newly built homes were lower than a year ago for the second straight month.”

The share of Federal Housing Administration (FHA) loan applications hit a record high for the survey, accounting for nearly one-third of all applications. The average loan size decreased, signaling that first-time homebuyers remain active in the market, Kan said.

MBA estimated that single-family new-home sales — often a leading indicator of the U.S. Census Bureau‘s new residential sales report — hit a seasonally adjusted annual rate of 634,000 units in February, up 2.9% from January’s pace of 616,000.

On an unadjusted basis, MBA estimates 57,000 new homes were sold in February, a 1.8% increase from the previous month.

By loan type, conventional mortgages made up 56.7% of applications. FHA loans had a share of 32.1%, followed by U.S. Department of Veterans Affairs (VA) loans at 10.6%, and U.S. Department of Agriculture (USDA) loans at 0.6%. The average loan size declined from $403,416 in January to $397,516 in February.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of homebuilders nationwide, providing early estimates of new-home sales and insights into loan usage trends.

The census bureau’s official new-home sales data, released monthly, records sales at the time of contract signing, typically aligning with mortgage applications.