New-home sales financed through FHA loans accounted for 7.5% of the market in the third quarter, the smallest share since the fourth quarter of 2007. According to the NAHB, the share of FHA-backed new-home sales has dropped by nearly two-thirds since the spring of 2020.
In contrast, the share of cash purchases has climbed each of the past three quarters to reach a 20-year high of 9.5% (14,000 sales). This is the first time since 2007 that cash sales accounted for both a larger number as well as a larger share of the total [than FHA].
Conventional loans financed 77.6% of new home sales in the third quarter—a 1.2 percentage point quarter-over-quarter increase. The share has risen each of the prior seven quarters. The share of VA-backed sales declined 0.8 percentage point to 5.4% in the third quarter–0.8 ppts higher than the share one year prior.
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 second quarter, the national median sales price of a new home was $454,900. Split by types of financing, the median prices of new homes financed with conventional loans, FHA loans, VA loans, and cash were $503,200, $340,300, $432,200, and $494,200, respectively.
The median new home price has increased 5.0% in 2022 but there is a large variance by type of financing. The price of a new home purchased with cash has increased 27.3% since Q1 2022 while the price of an FHA-backed sale has fallen 7.6%.