WASHINGTON–The level of non-conventional forms of financing for new single-family homes remained elevated during 2015, accounting for more than a third of the market, according to analysis of the Census Bureau Survey of Construction by the National Association of Home Builders (NAHB).
According to the NAHB, the South Atlantic division was most dependent on non-conventional financing, with its share exceeding 40% of the market. The West South Central and New England divisions also showed similarly high shares, with the difference being they relied on very different types of non-conventional financing. In New England, a third of all homes started in 2015 were cash purchases, while loans insured by the Federal Housing Administration (FHA) accounted for less than 3% of the market.
In contrast, the NAHB said it found homebuyers in the South Atlantic and West South Central division relied more heavily on FHA- and VA-backed loans that together accounted for more than 26% and 21% of the market, respectively.
At the other end of the spectrum, however, the East South Central division where only 16% of new homes started in 2015 were financed using non-conventional methods. This share is less than half of the US average of 34.5%, making it the lowest share of non-conventional financing in the nation, the NAHB said.
The Pacific and Mountain divisions registered shares of non-conventional financing methods close to the U.S. average, 34% and 36%, respectively. In the middle Atlantic division, one in four single-family homes started in 2015 was financed by non-conventional means, the NAHB said, while in the West North Central and East North Central divisions, only one in five new home buyers relied on non-conventional financing.
Other findings, according to the NAHB:
- For homes started in 2015, the share of mortgages insured by the FHA bumped up, especially in the Pacific and South Atlantic divisions where FHA loans accounted for 19% and 18%, respectively. This was largely due to a reduction in FHA mortgage insurance premiums implemented at the start of 2015.
- The share of VA-backed loans remained relatively stable in 2015, accounting for just over 6% of the market. However, their share was almost twice as high, approaching 12%, in the Mountain division, the only region in the nation where the share of VA-backed loans exceeded that of cash purchases and other types of financing combined.
- The share of cash purchases declined in 2015, most dramatically in the Mountain division, where cash purchases lost half of its market share. Overall, cash purchases accounted for 10% of the market. New England registered the nation’s highest share, with one in three new homes started in 2015 purchased with cash. The Middle Atlantic and East North Central divisions registered the second and third highest shares – 15% and 14%, respectively. But in the East South Central division, just 7% of single-family starts were financed with cash.
- In 2015, more than 36% of custom homes built by the owner were financed with cash, while less than 7% of spec homes were purchased with cash.
- Other types of non-conventional financing methods – such as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds and other – are particularly popular in the West South Central division (7.6%) and South Atlantic division (5.7%), both exceeding the national average of 4.5%.