Government Insured Loans Still Important in New Home Market

As of 2012, FHA/VA insured loans still account for well over 20 percent of the market for new single-family homes, according to data from the Survey of Construction (SOC).

The SOC is conducted by the Census Bureau, partly funded by HUD, and the source of the familiar monthly series on housing starts.  Among other things, the SOC collects information on the type of financing that has been or will be arranged for new homes.  Builders have the option of checking a mortgage insured by the Federal Housing Administration (FHA), a mortgage insured by the Veteran’s Administration (VA), conventional financing (i.e., a mortgage not insured by a government agency like FHA or VA), cash, and “other.”

During the peak years of 2005 and 2006, conventional loans accounted for over 85 percent of the new home market.  With the subsequent financial crisis and housing downturn, the conventional financing share dropped sharply to under 60 percent.  Cash and “other” made up part of the difference, but the increasing share of loans insured by FHA and VA was particularly dramatic—from 5 percent in 2006 to as high as 27 percent in 2010.

Financing Type

The policy implication is clear.  During boom times, government insured mortgages may seem unnecessary, but the insurance is sorely needed to prop up activity during a severe downturn.

As of 2012, the signs of stress in the new home market, as demonstrated by the type of financing, have not eased much.  Conventional mortgages still account for fewer than 60 percent of the new home market, and the FHA/VA insured share is still well over 20 percent.

This and other characteristics of new single-family homes started in 2012 are discussed in NAHB’s August Special Study in HousingEconomics.com.

8 Responses to Government Insured Loans Still Important in New Home Market

  1. […] Besides finding available workers, housing policy topics are also on the radar of the building industry. For example, the future of the housing finance system is under debate in Washington, D.C. And recent data from the Census Bureau Survey of Construction demonstrates the importance of government insured loans to enable housing demand. As of 2012, FHA/VA insured loans still account for well more than 20% of the market for new single-f…. […]

  2. […] The SOC is conducted by the Census Bureau, partly funded by HUD, and the source of the familiar monthly series on housing starts.  House size is one of several characteristics in the SOC data that NAHB analyzed in a recent HousingEconomics.com Special Study (an excerpt on financing of new homes appeared in a blog on August 7). […]

  3. […] The SOC is conducted by the Census Bureau, partly funded by HUD, and the source of the familiar monthly series on housing starts.  House size is one of several characteristics in the SOC data that NAHB analyzed in a recent HousingEconomics.com Special Study (an excerpt on financing of new homes appeared in a blog on August 7). […]

  4. […] The SOC is conducted by the Census Bureau, partly funded by HUD, and the source of the familiar monthly series on housing starts.  House size is one of several characteristics in the SOC data that NAHB analyzed in a recent HousingEconomics.com Special Study (an excerpt on financing of new homes appeared in a blog on August 7). […]

  5. […] The SOC is conducted by the Census Bureau, partly funded by HUD, and the source of the familiar monthly series on housing starts.  House size is one of several characteristics in the SOC data that NAHB analyzed in a recent HousingEconomics.com Special Study (an excerpt on financing of new homes appeared in a blog on August 7). […]

  6. […] data for this topic can be found in a recent NAHB study using information from the Census Survey of […]

  7. […] data for this topic can be found in a recent NAHB study using information from the Census Survey of […]

  8. […] data for this topic can be found in a recent NAHB study using information from the Census Survey of […]

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