WASHINGTON — Mortgage applications for newly built homes declined in August for the fifth consecutive month, another sign that affordability pressures are weighing on buyers — and conditions have since become even more challenging as 30-year mortgage rates have climbed above 7%.
Applications for new-home purchases fell 5.5% from August 2025 and 6% from July on an unadjusted basis, National Mortgage Professional reported, citing the Mortgage Bankers Association’s Builder Application Survey.
The decline came despite widespread use of incentives and price reductions by homebuilders seeking to keep buyers in the market.
“Increasing mortgage rates continue to put pressure on new home sales activity,” Joel Kan, MBA’s vice president and deputy chief economist, said, according to National Mortgage Professional. “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.”
Since August, borrowing conditions have deteriorated further. Mortgage News Daily’s daily survey showed the average 30-year fixed mortgage rate reached 7.07% Sept. 10 and climbed to 7.17% by Sept. 14, its highest level since early 2025.
More Buyers Turn to FHA
The higher-rate environment also appears to be affecting the types of mortgages new-home buyers are using.
FHA loans accounted for 35% of new-home applications in August, up from 34.6% in July, according to National Mortgage Professional.
Conventional mortgages represented 49.5% of applications, while Department of Veterans Affairs loans accounted for 13.9% and U.S. Department of Agriculture Rural Housing Service loans represented 1.7%.
“More homebuyers turned to FHA loans in response to higher mortgage rates,” Kan said.
The average new-home loan amount also declined, falling to $373,194 from $374,438 in July.
National Mortgage Professional said the combination of the rising FHA share and declining average loan size indicates buyers remain highly sensitive to monthly payments and the amount
Builder Incentives Fail to Reverse Decline
Homebuilders have increasingly turned to incentives and price reductions to offset affordability pressures, but those efforts have not been enough to reverse the decline in mortgage applications.
The National Association of Home Builders reported that 63% of builders offered sales incentives in August, according to National Mortgage Professional. About 35% reduced prices, with the average price cut among those builders at 6%.
Builders also have used mortgage-rate buydowns, closing-cost assistance and other concessions to make homes more affordable.
The incentives can lower a buyer’s initial borrowing costs and may influence whether a borrower uses a builder’s preferred lender. But five consecutive months of declining applications suggest higher rates and home prices remain significant obstacles to generating additional demand, National Mortgage Professional reported.
With daily 30-year rates now above 7%, that affordability challenge has intensified. Mortgage News Daily reported a 7.17% average 30-year fixed rate Sept. 14, compared with 6.89% Sept. 8 — an increase of 28 basis points in less than a week.
MBA Estimates Sales Pace Increased
Despite the decline in applications, MBA estimated new single-family home sales were running at a seasonally adjusted annual rate of 664,000 units in August.
That was up 2.6% from July’s annualized pace of 647,000 but remained 9% below the year-earlier level, according to National Mortgage Professional.
On an unadjusted basis, MBA estimated 52,000 new homes were sold in August, down 3.7% from 54,000 in July.
The increase in the seasonally adjusted sales estimate and decline in unadjusted mortgage applications are based on different measurements and are not necessarily contradictory.
MBA derives its new-home sales estimate using mortgage application data, assumptions about the survey’s market coverage and other factors. Its Builder Application Survey tracks mortgage application activity from homebuilders’ mortgage subsidiaries.
