The Share of New-Home Sales Backed by FHA Loans Is on the Rise

The share of new-home sales backed by FHA loans, a form of government-backed mortgage insured by the Federal Housing Administration (FHA), rose from 12.1% to 14.0% in the second quarter of 2023, the largest share recorded since Q1 2021, according to NAHB analysis of the most recent Quarterly Sales by Price and Financing report. FHA loans require lower minimum credit scores and down payments than many conventional loans, making them popular among first-time and low-income buyers.

Conventional loans financed 73.7% of new-home sales in Q2 2023, while the share of VA-backed sales increased from 5.2% to 5.4%, NAHB Eye on Housing reports.

Cash purchases made up 6.5% of new home sales in the second quarter of 2023. The share has declined each of the past two quarters and is down 4.2 ppt over that period. The share of cash purchases has decreased 2.9 percentage points over the past year and has ranged from 4.1% to 10.7% since Q2 2020.

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, 26% of existing home transactions were all-cash sales in June 2023, up from 25.0% in May and June 2022.

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