Summary
MBA's August Builder Application Survey shows new-home purchase mortgage applications fell 6% from July and 5.5% from a year earlier, extending the decline to five consecutive months. FHA loans rose to 35% of applications, the highest share in three months, while MBA estimated new-home sales at a 664,000 annual pace. The data show higher rates are changing both demand and the financing mix for newly built homes.
Mortgage demand for newly built homes weakened again in August, extending a five-month slide even as builders continued to convert enough buyers to keep estimated new-home sales above July’s pace.
The Mortgage Bankers Association’s Builder Application Survey showed applications for new-home purchases fell 6% from July and 5.5% from a year earlier. MBA said August marked the fifth consecutive monthly decline and the lowest application level of 2026.
“Increasing mortgage rates continue to put pressure on new home sales activity. Applications to purchase newly constructed homes declined in August for the fifth straight month, with the level of applications down to its lowest in 2026.”
Joel Kan, CMB, MBA vice president and deputy chief economist
The decline matters beyond the monthly application count. New construction has been one of the few places where buyers have had meaningful inventory choice during the post-pandemic housing shortage, and builders have frequently used mortgage-rate buydowns and other incentives to keep transactions moving. A sustained retreat in applications raises the question of how much longer those tools can offset borrowing costs that have moved back toward 7%.
FHA is taking a larger share
The product mix offers another signal about the pressure on affordability. FHA loans accounted for 35% of August applications, the highest share in three months, according to MBA. Conventional loans represented 49.5%, VA loans 13.9% and USDA Rural Housing Service loans 1.7%.
Kan said more buyers turned to FHA financing in response to higher mortgage rates. That shift is important for builders and lenders because FHA financing can serve borrowers with smaller down payments and different credit profiles than many conventional programs. A rising FHA share does not by itself show that buyers are becoming less creditworthy; it does show that the financing mix is changing as monthly payments become harder to absorb.
The average new-home loan size also edged lower, to $373,194 in August from $374,438 in July.
Applications fell, but MBA’s sales estimate rose
The application decline did not translate into a month-over-month drop in MBA’s estimated pace of new single-family home sales. MBA estimated sales were running at a seasonally adjusted annual rate of 664,000 in August, up 2.6% from July’s 647,000 pace. The August estimate was still 9% below the year-earlier pace.
On an unadjusted basis, MBA estimated 52,000 new homes were sold in August, down 3.7% from 54,000 in July.
The distinction is worth keeping clear. MBA’s Builder Application Survey tracks mortgage applications through builder-affiliated mortgage subsidiaries and uses those data, together with assumptions about market coverage and other factors, to estimate new-home sales. It is an early indicator rather than the government’s official new-home sales count. The Census Bureau records new-home sales at contract signing and publishes its own monthly estimate.
A tougher financing environment for builders
For the housing industry, the August data add another piece to a broader slowdown in residential construction. WRE News reported Monday that residential permitting over the 12 months through July was down 1.7% from a year earlier and remained well below Zillow’s pre-pandemic trend, with some of the sharpest pullbacks in Sun Belt markets including Austin, San Antonio, Orlando and Charlotte.
That creates pressure on both sides of the new-home market. Builders face a more difficult financing and development environment while prospective buyers face higher mortgage costs. If demand weakens enough to cause builders to cut starts and permits further, the near-term benefit of slower construction could eventually become a longer-term supply problem.
The 35% FHA share is therefore one of the more consequential numbers in MBA’s August report. Builders are still finding buyers, but the financing required to make those purchases work is shifting.
The next test will be whether mortgage rates stabilize after the Federal Reserve’s September meeting. Until then, the Builder Application Survey suggests the new-home market is not simply confronting fewer applications. It is confronting a buyer pool that is increasingly sensitive to how a purchase is financed.
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