FHA loans reach highest market share since 2012

The share of new-home sales financed via Federal Housing Administration (FHA) loans reached its highest level in seven years, according to the National Association of Home Builders (NAHB).

FHA-backed sales accounted for 17.2% of new-home sales in 2019, the largest percentage since hitting 20.6% in 2012. There were an estimated 117,000 homes bought with FHA financing in 2019, the first time since 2002 that the number of FHA-backed purchases surpassed 100,000.

FHA Loan Market Share 2009-2019

FHA loan share also grew in fourth-quarter of 2019, reaching with the 28,000 loans closed that quarter accounting for 18.4% of the 152,000 nationwide sales. That was up 2.9 percentage points on a quarterly basis and 5.7 percentage points year over year.

The full-year growth of FHA market share reversed a downward trend that began in 2015. That year, the share of FHA-backed purchases was at 16.2%. Each of the three years after that saw a decrease in FHA share — and by an increasing percentage each year. In 2018, the FHA share of all loans was 12%.

But with the first-time homebuyer making a comeback, FHA loan share could be in for even more growth. A report this past December from Genworth Mortgage Insurance revealed that third-quarter 2019 had the most sales to first-time homebuyers since 2011, while a TransUnion forecast that same month anticipated an influx of first-time buyers in 2020. With FHA products serving as a traditional landing spot for entry-level buyers, such figures and forecasts could presage a rising trendline.

Meanwhile, conventional loans — which had slowly but steadily begun to cut into FHA loan dominance in the entry-level market — accounted for 71.1% of new-home sales in fourth-quarter 2019, a bump of 1.5 percentage points from the previous quarter. Market share for conventional loans had fallen below 70% in the first three quarters of last year after staying consistently above that level for 10 straight quarters.

With rising market shares of conventional and FHA market loans, cash purchases and loans backed by the U.S. Department of Veterans Affairs (VA) shed 2.5 and 1.8 percentage points of market share, respectively, during fourth-quarter 2019. At 4.6%, cash sales recorded their smallest share since first-quarter 2017. VA loans, meanwhile, had their smallest market share since third-quarter 2018.

The NAHB analyzed data from the most recent quarterly sales by price and financing report, published by the U.S. Census Bureau, to arrive at its findings.


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