Mortgage applications to purchase new homes took a small step back in February from record levels during the previous month, but further positive momentum could be blunted by the coronavirus.
The Mortgage Bankers Association's Builder Application Survey found that the number of consumers seeking loans to purchase a new home fell by 1% compared with January, but was up 25.9% over February 2019.
However, the BuildFax Housing Health Report found single-family authorizations for new construction fell 7.21% in February from January. However, it rose 0.24% on a year-over-year basis.
"The broader economy is experiencing a volatile month as the stock market and general population react to the implications of COVID-19," said BuildFax Managing Director Jonathan Kanarek in the report. "Meanwhile, housing activity remains nearly unchanged from its growth trajectory thus far. However, COVID-19 is rapidly unfolding in the U.S. and the housing market may eventually feel the weight of this outbreak."
"For instance, the virus may dampen spring home buying season this year as prospective buyers could feel reluctant to attend open houses. Additionally, quarantines may lead to declines in construction work, and the already strained U.S. housing supply may continue to tighten," Kanarek said.
The National Association of Home Builders/Wells Fargo Housing Market Index found sentiment fell two points to 72 in March, as concern started in the construction industry regarding future prospects.
According to the MBA, new single-family home sales ran at a seasonally adjusted annual rate of 746,000 units in February, a decrease of 13.8% from January's SAAR pace of 865,000 units.
On an unadjusted basis, the MBA estimated 64,000 new-home sales in February, a decrease of 3% from 66,000 during January. Compared with a year ago, home sales increased 8%.
"Looking ahead, there is significant uncertainty regarding how the coronavirus epidemic will impact the housing market, and some of January's record-level activity could have been attributed to the warmer winter weather, lower mortgage rates, and the tight inventory of existing homes on the market — especially in lower price tiers," Joel Kan, associate vice president of economic and industry forecasting, said in a press release.
By product type, conventional loans composed 69.3% of loan applications, while Federal Housing Administration-insured loans composed 18.5%. Buyers seeking Veterans Affairs-guaranteed mortgages had an 11.4% share, while the U.S. Department of Agriculture Rural Housing Program loans composed 0.8%.
The average loan size of a new home decreased to $340,169 in February from $346,140 in January and $340,692 for February 2019, the MBA said.
