Applications for new home purchases increased by double-digits in the latest Mortgage Bankers Associationupdate, signaling an America that is prepared to buy more homes.
Texas, Florida and California were the top three states that led the way in new home purchase volume, with mortgage applications increasing 9.5%, 9.3% and 4.6%, respectively.
In the broader market, purchase applications continue to decline, dropping both week-over-week and year-over-year.
For instance, apps fell 1.8% this week after a significant drop last week, while the refinance index declined 2% from the previous week.
"The reason the broader market has slowed is because of the rise in mortgage rates," explained MBA chief economist Mike Fratantoni.
He added, "People are taking another look at finances and re-evaluating what size home is right for them given the higher level of rates."
However, the new home purchase market is writing a different story.
By product type, conventional loans composed 67.5% of loan applications, while Federal Housing Administration loans composed 17.8% of apps.
The average loan size of new homes increased from $289,650 in September to $294,480 in October, the MBA noted.
Going forward, the MBA believes new homes sales will increase 10% in 2014, compared to 2013 — matching the continued trend that new home purchases will continue growing.
The key indicator for the continued push in new home purchases will be strong economic data, specifically employment numbers, Fratantoni stated.
"The job market data from October was stronger than expected and that will be the source of homebuying going forward," the chief economist said.
He concluded, "It’ll be the main source of support for new home purchases and our expectation is that an increase in rates will be a minor headwind."
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