More than a Quarter of New Homes Had Non-Conventional Financing in 2018

NAHB analysis of the 2018 Census Bureau Survey of Construction (SOC) data shows that, nationwide, the share of non-conventional financing accounted for 28.6% of the market, while conventional financing dominated the market at 71.4% 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 38.7% in the West South Central but accounting for only 11.6% of new single-family home starts in the East South Central division.

Nationwide, FHA-backed loans remained the most dominant form of non-conventional financing of new home purchases, accounting for 11.0% of market share. The share of cash purchases, the second most prevalent form of non-conventional financing, was at 10.0% nationwide in 2018. VA-backed loans accounted for 5.6% while Other Financing was 2.1% of market share.

FHA-backed loans accounted for the majority of all non-conventional financing in the South Atlantic (16.2%), West South Central (15.9%), and Pacific (9.3%) divisions. New England division reported the lowest FHA-backed loans at 0.3%, followed by Middle Atlantic (1.1%), and East South Central (1.5%).

Cash financing dominated non-conventional forms of financing in New England, where 21.5% of all homes started were purchased with cash. Cash purchases led non-conventional financing in Middle Atlantic (14.8%), East North Central (12.5%), West North Central (10.1%), and East South Central (7.4%). The lowest market share was reported in South Atlantic division where 7.5% of single-family starts were financed with cash.

VA-backed loans was most used in the Mountain division, which accounted for 8.8% of non-conventional forms of financing. This is higher than the national market share of 5.6%. In New England division, VA-backed loans were only 1.1% of market share, the lowest market share for this category.

Other Financing as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds was highest in Pacific where it was 4.6% of market share, exceeding the national market share of 2.1% while Middle Atlantic division reported the lowest share at 0.9%.

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