Over the past year, mortgage applications for new-build homes have increased by 9%
Joel Kan, MBA vice president and deputy chief economist, emphasized that the increase in government borrowing is a key factor behind the growth of new residential mortgages.
“Applications for new construction homes increased 9 percent in December compared to a year ago, while the FHA share of applications reached the second-highest level in the history of the survey at 29 percent,” Kan said in a statement . “First-time buyers on the housing market remained active in the new-build segment, because the existing stock for starter homes remains tight.”
The Federal Housing Administration (FHA) share of lending activity rose to 29.4% – the second highest share in the history of the survey. FHA loans are often used by first-time homebuyers. The U.S. Department of Veterans Affairs (VA) and US Department of Agriculture (USDA) loans accounted for 9.9% and 0.5% of applications, respectively.
Meanwhile, the average loan size for new homes fell from $402,873 in November to $400,930 in December 2024.
This increase in demand for new residential mortgages coincides with growing confidence among homebuilders in 2025. According to the National Association of Home Builders (NAHB)/ Wells Fargo The Housing Market Index (HMI), the confidence score of builders for the construction of single-family homes, was 47 in January, one point higher than in December.
This may seem surprising given the pressures builders will face in the 2025 housing market. But homebuilders are still ready to take on new projects.
“Builders face continued near-term challenges to housing demand, with mortgage rates rising from nearly 6.1% at the end of September to over 6.9% today,” said NAHB chairman and custom homebuilder Carl Harris. “Land is expensive and financing for private builders remains expensive. However, there is hope that policymakers will take the impact of regulatory hurdles seriously and make improvements by 2025.”
NAHB chief economist Robert Dietz said a slight gain is forecast for single-family housing starts in 2025, but conditions are not ideal.
“And while the continued but slower easing of the Federal Reserve should help finance private builders currently squeezed out of some local markets. Builders are reporting that cancellations are increasing as a direct result of mortgage rates, which have risen again by almost 7%,” said Dietz.
