All-Cash New Home Sales Outnumber FHA-Backed for the First Time Since 2007

NAHB analysis of the most recent Quarterly Sales by Price and Financing published by the U.S. Census Bureau reveals that new home sales financed through FHA numbered 11,000 and accounted for 7.5% of the total in Q3 2022–the smallest share since the fourth quarter of 2007.  The share has dropped by nearly two-thirds since the spring of 2020.

In contrast, the share of cash purchases has climbed each of the past three quarters to reach a 20-year high of 9.5% (14,000 sales). This is the first time since 2007 that cash sales accounted for both a larger number as well as a larger share of the total.

Conventional loans financed 77.6% of new home sales in the third quarter—a 1.2 percentage point quarter-over-quarter increase. The share has risen each of the prior seven quarters. The share of VA-backed sales declined 0.8 percentage point to 5.4% in the third quarter–0.8 ppts higher than the share one year prior.

Although cash sales typically 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, 22% of existing home transactions were all-cash sales in September 2022, down from 24% in August and 23% in September 2021.

The average interest rate of a 30-year fixed rate mortgage increased 100 basis points, quarter-over-quarter.  Over the four quarters ending Q3 2022, the average rate of a conventional 30-year FRM spiked 369 basis points—the largest yearly increase since 1981.

Stock market returns (proxied by the S&P 500®) in the third quarter were -5.3%, quarter-over-quarter, and -16.8% year-over-year.

Each of these factors plays an important role in the dynamics among market share by type of financing. Higher stock returns and the resulting increased wealth aids borrowers in the underwriting process as well as increasing the down payment a household can afford (should they cash out some of their portfolio). Higher mortgage rates decrease the odds that a given loan will be approved, all else held equal, as they make monthly payments larger than they would otherwise be.

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 $454,900. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $503,200, $340,300, $432,200, and $494,200, respectively.

The median new home price has increased 5.0% in 2022 but there is a large variance by type of financing.  The price of a new home purchased with cash has increased 27.3% since Q1 2022 while the price of an FHA-backed sale has fallen 7.6%.


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