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More people are using cash or conventional loans to finance their new home purchase, according to an analysis by the National Association of Home Builders (NAHB). Cash sales are the highest they have been since Q3 2018. Additionally, the third quarter of 2019 shows a decrease in FHA-backed mortgages from the last quarter despite the rate being higher than Q3 of 2018.
NAHB analysis of the most recent Quarterly Sales by Price and Financing published by the U.S. Census Bureau reveals that mortgages backed by the FHA made up 16.3% (27,000) of total sales (177,000), 2.5 percentage points higher than Q3 2018 (35,000). The FHA share has averaged 17.9% since the end of the Great Recession.
Conventional loans accounted for 69.9% of new home sales in the third quarter of 2019, a 2.7 percentage point increase from Q2 2019 (revised). After 10 quarters above 70%, the percentage of new home sales financed with conventional mortgages has been below 70.0% each of the last three quarters.
As FHA market share increases, conventional loan market share typically falls and vice versa. The most recent peak in the conventional loan share occurred in the same quarter (Q2 2018) as the most recent trough in the share of FHA-backed sales.
