Share of Non-Conventional Financing Increased in 2023

Nationwide, the share of non-conventional financing for new home sales accounted for 32.4% of the market per NAHB analysis of the 2023 Census Bureau Survey of Construction (SOC) data. This is a significant 4.3 percentage point increase from the 2022 share of 28.1%. As in previous years, conventional financing dominated the market at 67.6% of sales, albeit lower than the 2022 share of 71.9%.

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, or state or local government mortgage-backed bonds. The reliance on non-conventional forms of financing varied across the United States, with its share at almost 40% in West South Central but only 17.1% of new single-family home starts in the Middle Atlantic division.

Nationwide, cash purchases were the majority share of non-conventional financing of new home purchases, accounting for 14% of the market share, slightly up from 13% in 2022. NAHB survey based on builders reported that for 2024, all-cash sales are a higher share at 22%. FHA-backed loans accounted for 12%, whereas in 2022, it was only 8% of the market share. The share of VA-backed loans was at 4% market share in 2023, while Other Financing was 3% of market share.

Regionally, cash financing held the highest share in East South Central, where 24.6% of all homes started were purchased with cash. Except for the South Atlantic, West South Central, and the Pacific, cash purchases led non-conventional financing in the remaining six census regions. Cash purchases accounted for 22.0% in East North Central, 16.9% in New England, 12.3% in Mountain, 12.0% in Middle Atlantic, and 10.6% in West North Central region.   

FHA-backed loans accounted for the majority of all non-conventional financing in the West South Central division accounting for 20.8% of the homes started. This share has gone up considerably  from 12.9% in 2022. The New England division reported the lowest FHA-backed loans with only a share of 1.2% of the homes started in 2023.

VA-backed loans were most used in the South Atlantic division, which accounted for 5.9% of non-conventional forms of financing. In New England, none of the homes started used VA-backed loans in 2023.  

Other financing such as the Rural Housing Service, Habitat for Humanity, loans from individuals, state or local government mortgage-backed bonds was highest in East North Central where it was collectively 5.6% of market share, while Middle Atlantic division reported the lowest share at 0.9%.