September 19, 2021

MP Now News

Mortgage News

Conventional Loans Take 76% Market Share, Highest Since 2008

Fannie Mae and Freddie Mac run away with new home finance. The National Association of Home Builders (NAHB) estimates that 76.3 percent of all new home sales were from conventional loans in the second quarter of the year. David Logan, writes in the NAHB Living in mind Blog says this is the largest proportion of these loans since the Great Recession began in 2008. It was 5.1 percentage points higher than the conventional loan share in the first quarter and 9.5 points more than in the second quarter of 2020.

The growth in conventional lending has been largely at the expense of the FHA. These loans funded 12.1 percent of new home sales in the second quarter, 6.7 points less than the previous quarter and 8.3 points year over year. Logan said the four-quarter moving average for FHA stock had moved up since the third quarter of 2018, however, the second-quarter data pushed that average down 1.1 points.

The proportion of VA loans fell 1 percentage point, the second decline in so many quarters, to 5.1 percent of new home purchases. The share of these loans is 7.1 percent below cash sales, the highest cash share since Q3 2019. The reported number of cash sales rose by 4,000 or 40.0% in the second quarter and rose by 6,000 year-on-year. “

Logan says the persistently low interest rates, the 40 percent return on the stock market in the four quarters ended in the 2nd through the FHA and VA. “Higher stock returns and consequent asset growth supports borrowers in the underwriting process as well as increasing the down payment a household can afford (should they pay off part of their portfolio), he said.

Cash sales play a bigger role in existing home sales. The National Association of Realtors estimates that 23 percent of these transactions were cash-only in July, compared with 16 percent the previous year. This was likely due to continued inventory shortages and the resulting sales by multiple bidders.

According to Logan, the financing differs depending on the market segment. This is demonstrated by the average home price assigned in each case. In the second quarter, the national median new home sales price was $ 374,900, but the median price for new home financed by conventional loans was $ 396,200, while the median FHA was $ 286,000 and the median for VA and cash purchases was $ 396,200 Was $ 406,400 and $ 382,800, respectively.