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Mortgage applications for new home purchases in July increased by 35.5% year-over-year, according to new data from the Mortgage Bankers Association (MBA). Compared to June, applications inched up by 0.2%.

MBA estimated new single-family home sales were running at a seasonally adjusted annual rate of 677,000 units in July, which is a 1.5% decline from the seasonally adjusted estimate of 687,000 units in June. On an unadjusted basis, MBA estimated that there were 56,000 new home sales in July 2023, a 6.7% decrease from 60,000 new home sales in June.

The average loan size for new homes decreased from $400,281 in June to $397,148 in July. By product type, conventional loans composed 65.3% of loan applications, FHA loans composed 24.2%, VA loans composed 10.2% and RHS/USDA loans composed 0.3%.

Joel Kan, MBA’s vice president and deputy chief economist, not the FHA share of purchase applications was the highest share since May 2020.

“FHA purchase loans are a popular option for many first-time homebuyers and this increasing trend in the FHA share is indicative of more first-time buyers looking to new homes as an option, given the lack of for-sale inventory among existing homes and challenging affordability conditions,” Kan said.