NAHB analysis of the most recent Census estimates concerning sources of financing for new home sales reveals a slight uptick for the share of FHA-backed mortgages.
According to data from the Census Bureau’s Quarterly Sales by Price and Financing and NAHB calculations, new home sales due to FHA-backed loans increased to a quarterly count of 23,000 and a market share of 17% for the first quarter of 2016. Previously, the FHA share had a noticeable increase at the start of 2015 due to a change in FHA mortgage rules.
It is worth adopting some caution associated with the Census market share estimates. In particular, the statistical error associated with the FHA, cash, and VA sales estimates from this data set are relatively high. This reduces the reliability of measures of short-term market changes.
Mindful of this limitation, over the long run the current FHA-share is lower than the 28% share determined for the first quarter of 2010 but is higher than the 10% 2002-2003 average.
Cash-based transactions for the fourth quarter made up just over 6% of sales for a total of 8,000 homes. During the 2002-2003 period, cash sales made up only 4% of purchases. However, in contrast to new home sales, cash purchases constitute a considerably larger share of the existing home market – 25% in March according to estimates from the National Association of Realtors.
It is also worth noting that a different measure from CoreLogic shows a higher market share for cash sales for new construction: 17% in January.
VA-backed loans were responsible for about 8% of new home sales during the first quarter of 2016.
Conventional financing has expanded as the housing recovery has grown. The market share of new home sales with conventional financing was 62% in 2011 and came in at approximately 68% for the first quarter of 2016.
These sources of financing serve distinct market segments, which is revealed in part by the median new home price associated with each. For the first quarter, the median new home price due to FHA financing was $204,700. The median price for VA-backed loans was $265,500.
Conventional mortgage financing had a median price of $325,000.
Finally, the median price for cash purchases for the first quarter was $293,400.