NAHB analysis of the most recent Quarterly Sales by Price and Financing published by the U.S. Census Bureau reveals that FHA-backed sales made up 20.4% of new home sales in the first quarter of 2020, the largest market share since 2012. In addition, the share of cash sales (4.2%) tied a decade low.
FHA-backed sales made up 20.4% of new home sales in the second quarter of 2020 as the four-quarter moving average (MA) market share increased 0.6 percentage point (ppt) to 18.2%.
As FHA market share increases, conventional loan market share typically falls and vice versa. Over the past six quarters, the share of new home sales (four-quarter MA) financed with conventional loans has decreased by 5.9ppts while FHA’s market share has climbed 6.0ppts. 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.
Mortgages backed by the VA accounted for 15,000 of total sales (191,000) in Q2 2020, down 1,000 from the downwardly revised Q1 total. The share of sales financed with VA loans declined 0.9 percentage point from the prior quarter and was 0.2 ppt lower than Q2 2019.
Conventional loans accounted for 67.5% of new home sales in the second quarter of 2020, a 1.6 percentage point decrease from Q1 2020 (revised) and the lowest second-quarter share since 2012. The last time the percentage of new home sales financed with conventional mortgages was greater than 70.0% was Q4 2018 (74.6%).
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, 16% of existing home transactions were all-cash sales in June 2020, down from 17% in May and equal to the June 2019 share.
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 FHA loan share is 18.1 percentage points higher than its 2.3% low reached in Q1 2007 and 3.2 percentage points higher than its post-Great Recession average.
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 $313,200. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $338,300, $245,100, $335,800, and $314,200, respectively.