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New Index Points to Slower New Home Sales

Builder Application Survey down in June

July 11, 2013

By Mortgage Daily staff

A new survey has been created to provide an early gauge for upcoming new home purchases. The first report points to a summer slowdown.

The Builder Application Survey captures loan application activity for financing new single-family properties. Data is submitted by lenders that are affiliated with home builders.

The new report is expected to provide a preview of monthly data on new home sales that is jointly published by the Census Bureau and the Department of Housing and Urban Development.

The Mortgage Bankers Association is behind the new survey, according to an announcement Thursday.

Mike Fratantoni, MBA's vice president of research and economics, said in the statement that the data used in the survey represents an estimated 20 percent of the new home sale market.

The trade group noted that home loans usually close 45 days or more after the initial loan application.

"The Census Bureau's estimate of new home sales is based on initial contract signings, which most often occur around the same time as the mortgage application.," Fratantoni explained. "This is why we believe the new Builder Application Survey should track closely with, and predict, new home sales."

The Washington, D.C.-based trade group already publishes a weekly application survey. While a purchase share of activity is included in that report, MBA said the data is mostly representative of existing home sales since existing home purchases are currently running at ten times the level of new home purchases.

MBA said its new survey indicates that new home financing fell 15 percent in June compared to May. No seasonal adjustment was made.

More than two-thirds of new home financing activity was conventional. A 17.4 percent share was recorded for applications on loans insured by the Federal Housing Administration.

Mortgages guaranteed by the Department of Veterans Affairs accounted for 13.4 percent of new home activity, and RHS/USDA share was 1.9 percent.

Data reported on June 25 by the Commerce Department and HUD indicated that the seasonally adjusted annual rate of new home sales was 476,000 in May. The rate increased from a revised 466,000 in April.

But MBA's data suggests that new home sales sank last month.

MBA estimated new single-family home sales were running at a seasonally adjusted annual rate of just 413,000 in June.

New home sales during just May, without any seasonal adjustment, were 45,000 in May, according to the government data. Sales slipped from 46,000 in April.

The slide accelerated last month, based on MBA's estimate for June of 39,000.

The government data had the average price of new homes placed under contract at $307,800 in May, dropping from $331,300 a month earlier.

MBA's survey suggests that the decline continued into last month, with the average home purchase loan amount of $283,000 in June off slightly from the previous month's $283,795.

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