All-Cash Share of New Home Sales Climbs in Q3

2023-10-25T12:16:29-05:00

NAHB analysis of the most recent Quarterly Sales by Price and Financing report reveals that the all-cash share of new home sales climbed substantially in the third quarter of 2023 while VA-backed sales share fell by nearly half. Additionally, the median purchase price of homes bought with cash surged by one-third over the quarter. After declining each of the two prior quarters, the share of cash purchases surged from an upwardly revised 7.1% of new home sales in Q2 to 9.2% in the third quarter of 2023. The 2.1 ppt quarterly increase—equal to the increases in Q3 2011 and Q2 2021—is tied for the largest since climbing 2.5 ppts to 6.7% in 2010.† 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 seven quarters since, the share has averaged 8.9%. The chart below illustrates how much more pronounced the relationship between the all-cash share (four-quarter moving average) and the Federal Funds rate has become since 2017. 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 September 2023, up from 27%% in August and 22% in September 2022. Conventional loans financed 74.7% of new home sales, up 1.3 percentage points over the quarter but 1.5 ppts higher than the 2022 Q3 share. In contrast, the share of FHA-backed sales declined from 13.6% to 13.2%. Although this represents a 4.8 ppt increase over Q3 2022, it remains well below the post-Great Recession average of 17.0%. The share of VA-backed sales fell by nearly half–declining from 6.0% to 3.4%, over the quarter—reaching the lowest share 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 third quarter, the national median sales price of a new home was $431,000. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $466,600, $330,700, $373,000, and $486,800, respectively. The purchase price of new homes declined over the past year regardless of means of financing, In contrast, the year-over-year change in median price varied greatly in both direction as well as magnitude. The median cash sales price surged 33.4% over the quarter while the price of FHA- and VA-backed sales both declined roughly five percent. † Some caution should be exercised when interpreting both nominal as well as percentage changes in the all-cash and VA-backed share new home sales. The number of sales is small in historical terms relative to conventional loan and FHA-backed sales. This may result in higher volatility in the initially reported data and in the magnitude of revisions in percentage terms. Related ‹ Lack of Resales Boost New Home Sales in SeptemberTags: conventional loans, conventional loans market share, fed funds rate, federal funds rate, Federal Reserve, FHA, FHA loans, fha mortgages, new home cash purchases, new home sales by type of financing, sales by financing, VA

All-Cash Share of New Home Sales Climbs in Q32023-10-25T12:16:29-05:00

Share of Non-Conventional Financing Holds Steady in 2022

2023-09-06T09:22:17-05:00

NAHB analysis of the 2022 Census Bureau Survey of Construction (SOC) data shows that, nationwide, the share of non-conventional financing for new home sales accounted for 28.1% of the market, roughly the same as in 2021, at 28.8%. As in previous years, conventional financing dominated the market at 71.9% of sales. In 2020, the share of non-conventional financing was 34.4% of the market while conventional financing accounted for 65.6% of the market share. Non-conventional forms of financing, as opposed to conventional mortgage loans, include loans insured by the Federal Housing Administration (FHA), VA-backed loans, cash purchases and other types of financing such as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds. The reliance on non-conventional forms of financing varied across the United States, with its share at 34.0% in West South Central but accounting for only 14.9% of new single-family home starts in the Middle Atlantic division. Nationwide, cash purchases were the majority share of non-conventional financing of new home purchases, accounting for 13% of the market share up from 11% in 2021. FHA-backed loans accounted for 8% which is lower than in 2021, where it was 11% of the market share. The share of VA-backed loans was at 4% market share in 2021 while Other Financing was 3% of market share. Cash financing dominated non-conventional forms of financing in East South Central, where 24.2% of all homes started were purchased with cash. Except for West South Central, cash purchases led non-conventional financing all other census regions. Cash purchases accounted for 23.3% in New England, 10.1% in Middle Atlantic, 17.6% in East North Central, 12.6% in West North Central, 12.1% in South Atlantic, 10.3% in Mountain, and 9.7% in Pacific. FHA-backed loans accounted for the majority of all non-conventional financing in the West South Central division accounting for 12.9% of the homes started. New England division reported the lowest FHA-backed loans with none of the homes started in 2022 were purchased with FHA-backed loans. VA-backed loans were most used in the Mountain division, which accounted for 6.7% of non-conventional forms of financing. In New England, VA-backed loans were only 0.3%, the lowest market share for this category. Other financing such as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds was highest in West South Central where it was 6.3% of market share, while Middle Atlantic division reported the lowest share at 0.6%. Related ‹ Large Metro Markets Show Biggest Slowdown in Single-Family ConstructionTags: conventional loans, FHA, new home cash purchases, nonconventional loans, SOC, VA loans

Share of Non-Conventional Financing Holds Steady in 20222023-09-06T09:22:17-05:00
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