Dive Brief:
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The number of new home sales financed by conventional mortgages rose to 74.1% in the third quarter of this year to the highest level since 2008, according to an analysis of Census Bureau data by the National Association of Home Builders.
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Cash purchases for new homes accounted for 5% of sales in the third quarter, the smallest portion they have since the second quarter of 2010. However, cash purchases typically take a larger share of the existing home sales market, at 21% in October. Federal Housing Administration loans for new homes fell from 17% to 14% in the third quarter.
- Overall, the number of new homes sold during the period fell 6%.
Dive Insight:
Conventional financing for new home purchases has continued to grow through the housing market’s recovery, with the market share of new home sales with conventional financing at 58% in 2009, according to the NAHB.
It comes as recovery builds momentum, with the Commerce Department reporting last week that new single-family home sales increased 5.2% in November from the month prior to a seasonally adjusted annual rate of 592,000, up 16.5% on the same period last year.
The recovery in sales is largely being driven by a shortage of homes on the market. Inventory levels have fallen for 22 consecutive months, according to a recent report by Zillow.
An easing in inventory tightness is not expected in the near-term as the latest Commerce Department figures show that single-family housing starts dropped 4.1% from October to November to a seasonally adjusted annual rate of 863,000, while building permit authorizations, an indicator of future construction activity, crumbled 4.7%.
With inventories struggling to keep pace, home price growth is only expected to taper in some markets in the new year, and recent increases in mortgage interest rates could further slow activity.
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