The share of new single-family home sales purchased using conventional mortgage financing is rising, as the share of Federal Housing Administration (FHA) backed mortgages fell during 2013.
According to data from the Census Bureau’s Quarterly Sales by Price and Financing, the onset of the housing crisis in 2007 led to a decline in the share of new home sales due to conventional mortgage financing and increases in the shares due to mortgages backed by the FHA and the Department of Veteran’s Affairs (VA), as well as cash purchases.
For the fourth quarter of 2013, the share of cash purchases fell slightly to 6% from 7% during the prior quarter. The high point for cash purchases occurred in the third quarter of 2011 when the market share was almost 8% of sales. Thus, the cash share of new single-family home sales is down from post-recession peaks but remains elevated compared to more normal periods (e.g. approximately 4% share during 2002-2003).
In contrast, cash purchases constitute a considerably larger share of the existing home market – 32% of sales in December 2013 for example.
New home sales due to FHA-backed loans fell to 13% of the market during the final quarter of the year. This is down from 27.6% in the first quarter of 2010 but above the 10% 2002-2003 average. As the conventional mortgage financing share has risen, the share of new single-family home sales due to FHA-backed mortgages has declined. Falling FHA loan limits will likely place additional downward pressure on this share in 2014.
VA-backed loans were responsible for 7% of new home sales during the fourth quarter of 2013.
These sources of financing serve distinct market segments, which is revealed in part by the median new home price allocable to each. For the fourth quarter, the median new home price due to FHA financing was $212,400. The median price for VA-backed loans was similar: $205,100.
Conventional mortgage financing had a median price of $276,600.
Finally, the median price for cash purchases for the fourth quarter was $261,000.