Share of Non-Conventional Financing Hold Steady in 2020


NAHB analysis of the 2020 Census Bureau Survey of Construction (SOC) data shows that, nationwide, the share of non-conventional financing for new home sales accounted for 34.4% of the market, while conventional financing dominated the market at 65.6%. In 2019, share of non-conventional financing was 35.0% of the market while conventional financing accounted for 65.0% 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 43.8% (down from 2019 share of 48.5%) in the West South Central but accounting for only 17.8% of new single-family home starts in the East North Central division.

Nationwide, FHA-backed loans remained the most dominant form of non-conventional financing of new home purchases, accounting for 17.2% of market share. The share of cash purchases, the second most prevalent form of non-conventional financing, was at 8.2% nationwide in 2020. VA-backed loans accounted for 6.5% while Other Financing was 2.6% of market share.

FHA-backed loans accounted for the majority of all non-conventional financing in the South Atlantic (27.5%), West South Central (23.7%), and Pacific (13.8%) divisions. New England division reported the lowest FHA-backed loans at 0.5%, followed by East South Central (1.3%) and Middle Atlantic (2.1%).

Cash financing dominated non-conventional forms of financing in New England, where 32.5% of all homes started were purchased with cash. Cash purchases led non-conventional financing in East South Central (16.7%), Middle Atlantic (14.5%), East North Central (8.9%), and West North Central (8.6%). The lowest market share was reported in South Atlantic division where 5.1% of single-family starts were financed with cash.

VA-backed loans was most used in the Mountain division, which accounted for 15.8% of non-conventional forms of financing. In East North Central division, VA-backed loans were only 1.0% of market share, the lowest market share for this category.

Other financing such 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 5.3% of market share, while Middle Atlantic division reported the lowest share at 0.8%.

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