It seems the use of Federal Housing Administration-backed loans on new home purchases is on the decline. According to experts at the National Association of Homebuilders, who recently analyzed the Census Bureau’s Quarterly Sales by Price and Financing Report, FHA-guaranteed mortgage loans have fallen five full percentage points over the last year.
FHA loans accounted for just 11.9 percent of all new home sales in Q2 of this year, falling below the 12 percent mark for the first time since 2014.
“Over the long run, the current FHA share is less than half its 28 percent share from the first quarter of 2010 but still elevated compared to the 10 percent average of 2002-2003,” the NAHB reported.
Cash sales rose two percentage points over the same period, making up 6.5 percent of all new home sales. According to the NAHB, cash sales typically make a bigger portion of existing home purchases, but still, these numbers were down as well.
“Although cash sales make up a small portion of new home sales, they constitute a larger share of existing home sales,” the NAHB reported. “Roughly 18 percent of existing home transactions were all-cash sales in June—the smallest share since June 2009—according to estimates from the National Association of Realtors.”
Conventional loans comprised the bulk of all new Q2 purchases at 72.6 percent—a steep increase from just eight years ago.
“Conventional financing has expanded as the housing recovery has continued,” the NAHB reported. “The market share of new home sales with conventional financing was 62.2 percent in 2009 and 72.6 percent in the second quarter of 2017. This share has remained between 68 percent and 75 percent over the past four years.”
VA loans made up 8.9 percent of all new home mortgages in the second quarter, rising by about 15,000 loans total. However, the overall market share for VA products was down for Q2, falling 0.1 percent since earlier this year. Still, despite the slight downtick, VA loans are up significantly from the pre-recession years, when an average of just 2.9 percent of all new home purchases were backed by VA products.