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


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
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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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