All-Cash Share of New Home Sales Remains Elevated in 2023

NAHB analysis of the most recent Quarterly Sales by Price and Financing report reveals that the all-cash purchases accounted for 8.4% of new home sales in 2023—a 1.3 percentage point decline over the year but still the second-highest share since 1991.  In contrast, the share of new home sales backed by VA loans fell to a 16-year low of 4.8% in 2023 and has declined each of the past four years.

Over the 30-year period preceding the current, aggressive Federal Reserve rate hike cycle, the share of all-cash new home sales averaged 5.3%. In the eight quarters since, the share has averaged 9.0%. The chart below illustrates how much more sensitive the all-cash share has become to changes in the Federal Funds rate since 2017.

The interest rate hikes have caused the average mortgage rate to more than double since Q4 2021, as the average rate surged from 3.08% to 7.30% over the two years ending Q4 2023.

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, 29% of existing home transactions were all-cash sales in December 2023, up from 27% in November and 28% in December 2022.

Conventional loans financed 73.4% of new home sales, up 0.3 percentage point over the quarter but down 2.2 ppts since Q4 2022. The share of FHA-backed sales also increased, climbing from 13.2% to 14.0%. Despite a 5.6 ppt increase compared to Q4 2022, the share remains below the post-Great Recession average of 17.0%.

The share of VA-backed sales ticked down 0.1 percentage point in Q4—reaching the lowest level since 2007.

Price by Type of Financing

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 fourth quarter, the national median sales price of a new home was $417,700. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $483,300, $320,400, $415,400, and $410,800, respectively.

The median purchase price of new homes declined from $457,800 to $427,400, or 6.6%, in 2023.  Median prices of loan-financed new home sales fell regardless of the source. In contrast, the price of new homes purchased with cash increased 4.0% in 2023.

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