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Two new data reports from the Mortgage Bankers Association (MBA) show a rise in new home purchase mortgage applications and a decline in the number of home loans in forbearance.

The MBA Builder Application Survey data for March reported a 0.6% year-over-year increase in mortgage applications for new home purchases and a 10% month-over-month increase. MBA estimated that new single-family home sales were running at a seasonally adjusted annual rate of 666,000 units in March, a 3.2% drop from the February pace of 688,000 units. On an unadjusted basis, MBA estimated that there were 65,000 new home sales in March, up 6.6% from 61,000 new home sales in February.

By product type, conventional loans composed 66.4% of loan applications, followed by FHA loans with a 22.6%s share, VA loans at 10.7% and RHS/USDA loans at 0.3%. The average loan size of new homes increased from $406,953 in February to $407,015 in March.

“Mortgage applications for new home purchases increased in March. Low for-sale inventory continues to constrain sales, along with mortgage rates that remain above 6%,” said MBA Vice President and Deputy Chief Economist Joel Kan. “MBA’s estimate for new home sales was down three percent from the previous month. New home sales will be key to the housing market recovery in 2023 as they account for an increasing share of purchase activity as home builders maintain construction levels and offer concessions for buyers. On the other hand, existing home inventory remains low as many current homeowners are locked-in to their homes with a lower mortgage rate.”

Separately, MBA’s latest Loan Monitoring Survey determined the total number of loans now in forbearance decreased by 5 basis points (bps) from 0.60% of servicers’ portfolio volume in February to 0.55% as of March 31. MBA estimated there were 275,000 homeowners currently in forbearance plans.

During March, the share of Fannie Mae and Freddie Mac loans in forbearance decreased 2 bps to 0.26%. Ginnie Mae loans in forbearance decreased 10 bps to 1.18%, and the forbearance share for portfolio loans and private-label securities decreased 10 bps to 0.68%.

“As the Covid-19 national emergency draws to a close, the number of loans in forbearance continues to drop,” said Marina Walsh, MBA’s vice president of industry analysis. “Mortgage performance remains strong with the percentage of borrowers who were current on their mortgage payments and post-forbearance workouts increasing in March.”

Walsh added that the trade organization’s forecast “still calls for a recession in 2023, which may change the current performance levels, but credit quality is generally good and many borrowers facing financial hardship can now access enhanced loss mitigation options that resulted from successes of pandemic-related policies.”