Eye On Housing
The share of new single-family home sales purchased using Federal Housing Administration (FHA) backed mortgages continued to fall at the start of 2014.
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 first quarter of 2014, the share of cash purchases rose slightly to 7.5% from just more than 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 somewhat 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 – 33% of sales in March 2014 for example.
It is worth noting that another measure of cash sales for total new construction from CoreLogic shows a higher level of cash sales than the Census: 17.7% in December 2013.
New home sales due to FHA-backed loans fell to 13% of the market during the first quarter. 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 about 7.5% of new home sales during the first quarter of 2014.
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 $222,600. The median price for VA-backed loans rose to $264,000.
Conventional mortgage financing had a median price of $276,900.
Finally, the median price for cash purchases for the fourth quarter was $320,100.
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