NAHB analysis of the most recent Quarterly Sales by Price and Financing published by the U.S. Census Bureau reveals that mortgages backed by the FHA made up 16.3% (27,000) of total sales (177,000), 2.5 percentage points higher than Q3 2018 (35,000). The FHA share has averaged 17.9% since the end of the Great Recession.
Conventional loans accounted for 69.9% of new home sales in the third quarter of 2019, a 2.7 percentage point increase from Q2 2019 (revised). After 10 quarters above 70%, the percentage of new home sales financed with conventional mortgages has been below 70.0% each of the last three quarters.
As FHA market share increases, conventional loan market share typically falls and vice versa. The most recent peak in the conventional loan share occurred in the same quarter (Q2 2018) as the most recent trough in the share of FHA-backed sales.
Cash purchases accounted for 6.6% of new home sales in the third quarter of 2019, the highest since Q3 2018 (6.9%). The percentage of new homes bought with cash has risen each of the past two quarters.
Although cash sales make up a small portion of new home sales, they constitute a larger share of existing home sales. According to estimates from the National Association of Realtors, roughly 17% of existing home transactions were all-cash sales in September 2019, down from 19% and 21% in August 2019 and September 2018, respectively.
The share of new home sales backed by VA products declined 0.3 percentage point to 7.8% of the total—1.1 percentage points below the most recent 10-year average (8.9%).
It is worth adopting some caution associated with the Census data as they are estimates based on sample statistics. The statistical error associated with the FHA, cash, and VA sales estimates from this data set are relatively high, meaning that although the data are presented as single numbers, the true values may be substantially different.
Mindful of these limitations, over the long run the current conventional loan share is 23.8% lower than its 91.7% high reached in 2006 and 3.1% higher than its average since the end of the Great Recession.
Different sources of financing also serve distinct market segments, which is revealed in part by the median new home price associated with each. In the second quarter, the national median sales price of a new home was $310,900. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $352,000, $224,600, $288,800, and $304,800, respectively.
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