More new-home buyers opted for non-conventional loans in 2019

The National Association of Home Builders (NAHB) examined the 2019 Census Bureau Survey of Construction and found that market share of nonconventional financing in the new-home market grew, comprising 35.0% of all sales.

That’s up from 28.6% of new-home sales in 2018, an increase of 6.4 percentage points year over year. And while conventional financing continued to dominate, its market share retreated from 71.4% in 2018 to 65.0% in 2019.

Breaking down its findings on its Eye on Housing blog, the NAHB detailed the market share breakdown of financing by Census divisions, finding that high percentages of homebuyers opted for nonconventional financing in southern areas with high new-home sales activity.

Nonconventional financing was most prevalent (48.5% of all new home sales) last year in the West South Central region, made up of Texas, Oklahoma, Arkansas and Louisiana. The second highest share was found in the South Atlantic — Delaware, Maryland, West Virginia, Virginia, the Carolinas, Georgia and Florida — where 37.6% of new-home loans were nonconventional.

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Conversely, just 15.6% of new-home sales in the Middle Atlantic, comprised of New York, New Jersey and Pennsylvania, were financed with nonconventional mortgages.

Nationally, loans backed by the Federal Housing Administration (FHA) made up most of the nonconventional loans used by homebuyers in 2019. FHA loans accounted for 15% of total new-home sales market share, up from 11.0% in 2018.

Second most common were cash purchases, at 11.0% nationally in 2019, while loans backed the Department of Veterans Affairs made up 6.0% of all loans. Other financing — Rural Housing Service loans, Habitat for Humanity, loans from individual backers and state or local government mortgage-backed bonds — made up the rest of the market at 3.0%.


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