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Share of New-Home Sales Financed Through FHA Loans Falls to 14-Year Low

Financing

Share of New-Home Sales Financed Through FHA Loans Falls to 14-Year Low

Over the last four quarters, the share of new-home sales financed with conventional loans has climbed by 4.3 percentage points, while the Federal Housing Authority’s market share has dropped 6.2 percentage points


July 28, 2022
FHA loan paperwork on desk with calculator and statistics
Image: Stock.adobe.com

The most recent Quarterly Sales by Price and Financing published by the U.S. Census Bureau reveals that the share of new-home sales financed through the Federal Housing Authority (FHA) fell to 11.0% in the second quarter of 2022, the smallest share recorded since early 2008. Of all new-home sales in Q2 2022, 74.8% were financed through conventional loans, a 1.8 percentage point quarter-over-quarter decline after five quarters of consecutive gains, according to the National Association of Home Builders' Eye on Housing.

The median new-home price associated with each market segment determines the primary source of financing. For instance, the national median sales price of a new home in the second quarter was $440,300, but when split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $484,900, $370,600, $414,500, and $456,500, respectively.

As conventional loan market share falls, the FHA share typically increases and vice versa. Over the past four quarters, the share of new home sales (four-quarter moving average) financed with conventional loans has climbed 4.3 ppts while FHA’s market share has decreased 6.2 ppts.

The share of VA-backed sales rose 0.8 percentage point to 6.1% in the second quarter–0.4 ppts lower than the share one year prior. Cash purchases made up a slightly higher share of sales in the fourth quarter—up 0.6 ppt—as they accounted for 9.2% of the total although the number of sales fell 3,000.  The share of cash purchases has climbed four of the past five quarters since reaching its most recent trough of 4.4% and is the largest share since Q4 2014.

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