The Mortgage Bankers Association (MBA) is expecting that a higher volume of new home sales occurred in October than in the previous month, even as purchase prices rise. MBA says its Builder Application Survey (BAS) showed a 6 percent month-over-month increase in purchase applications even though they were down 15.2 percent from October 2020. That data is not seasonally adjusted.

Based on those applications, they estimate that new single-family home sales in October will total 68,000, up 3.0 percent from 66,000 sales in September. On a seasonally adjusted annual basis the 897,000-unit pace is 6.4 percent higher than the rate of 843,000 units the prior month.

"Applications for new home purchases in October were down 15 percent from a year ago, but activity was 6 percent higher than in September. The strong monthly gain puts MBA's estimate of new home sales at its strongest pace since January 2021," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Purchase activity continues to be dominated by higher loan balance transactions, which pushed the average new home loan size up to over $412,000, another new record in the survey. Recent U.S. Census data show an increasing share of new sales are for homes yet to be built or still under construction, and a shrinking share of completed homes. Housing demand remains strong, and buyers are making quick decisions in a still very competitive market."

Added Kan, "Homebuilders still face delays and challenges from supply-chain bottlenecks and rising costs. Overall construction costs, as measured by the Producer Price Index (PPI), recorded an annual increase of 12.3 percent in October, which is almost five times the average annual change."

Conventional loans accounted for 75.7 percent of loan applications. FHA loans and VA loans comprised 13.5 percent and 10.3 percent respectively and RHS/USDA loans had an 0.5 percent share. The average loan size of new homes increased from $408,522 in September to $412,339 in October.

MBA's Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as information on market coverage MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.  The census report will be published on November 24.