Share of Non-Conventional Financing Increased in 2019


NAHB analysis of the 2019 Census Bureau Survey of Construction (SOC) data shows that, nationwide, the share of non-conventional financing for new home sales accounted for 35.0% of the market, while conventional financing dominated the market at 65.0%. In 2018, share of non-conventional financing was 28.6% of the market while conventional financing accounted for 71.4% of the market share.

Non-conventional forms of financing, as opposed to conventional mortgage loans, include loans insured by the Federal Housing Administration (FHA), VA-backed loans, cash purchases and other types of financing such as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds. The reliance on non-conventional forms of financing varied across the United States, with its share at 48.5% in the West South Central but accounting for only 15.8% of new single-family home starts in the Middle Atlantic division.

Nationwide, FHA-backed loans remained the most dominant form of non-conventional financing of new home purchases, accounting for 15.0% of market share. In 2018, it was 11.0% of the non-conventional financing market share. The share of cash purchases, the second most prevalent form of non-conventional financing, was at 11.0% nationwide in 2019. VA-backed loans accounted for 6.0% while Other Financing was 3.0% of market share.

FHA-backed loans accounted for the majority of all non-conventional financing in the South Atlantic (24.4%), West South Central (20.9%), and Pacific (12.3%) divisions. New England division reported the lowest FHA-backed loans at 1.1%, followed by Middle Atlantic (1.6%), and East South Central (1.9%).

Cash financing dominated non-conventional forms of financing in New England, where 28.7% of all homes started were purchased with cash. Cash purchases led non-conventional financing in Middle Atlantic (11.5%), East North Central (13.7%), West North Central (13.4%), and East South Central (23.4%). The lowest market share was reported in South Atlantic division where 5.4% of single-family starts were financed with cash.

VA-backed loans was most used in the Mountain division, which accounted for 11.0% of non-conventional forms of financing. In Middle Atlantic division, VA-backed loans were only 0.4% of market share, the lowest market share for this category.

Other Financing as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds was highest in West South Central where it was 5.7% of market share, while South Atlantic division reported the lowest share at 1.5%.

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