MARKET PULSE – FHA loans gaining market share of home sales

Don Fenley 

With all the changes that have rippled through the housing market, one that is often overlooked is financing. While there are few big changes in how buyers are paying, when there is a change it’s worth noting.

Conventional financing has always been the staple and consistently accounts for almost half of existing home sales. But its market share is slipping. The annual average was 49.2% of all sales in 2022 and 47.1% in 2023. Last month it dropped to 42% – a two-year low.

Blame the decline on more FHA financing, which is typically a sign that the number of buyers with lower credit scores and less cash for down payments is increasing. FHA’s annual share of local home loans in 2022 was 8.5%. It increased to 9.8% in 2023. Last month it was 13.9% – a two-year high that corresponds with the two-year low for conventional loans.

Cash sales, which always draws the most comments and public attention, have recently accounted for a little less than a third of local sales. That share hasn’t varied much in the last two years. According to a recent report from the National Association of Realtors (NAR) cash sales are increasing on the national level by the number of buyers who want what to avoid high mortgage rates. Locally, the opposite – at leas in the share of total sales – is trending. Cash sales accounted for almost half of the local existing home sales in 2011, 2012, and more than half in 2013.

Those were the prime Great Recession recovery years in the Tri-Cities region, and the median sales price ranged from $120,000 in 2011 to $125,000 in 2012.

VA loans have consistently accounted for just under 10% of local sales. They also consistently have the second highest median sales price.

USDA loans account for les than 2% of all sales.

Last month there were two methods that haven’t shown up very often for sales of MLS listed properties. There were two assumed loans and one owner-financed sale.

Here’s how the median sales price and discounts for January’s sales by loan type looked.

Conventional – $279,900, minus $10,695.

Cash – $232,000, minus $21,603

FHA – $200,000, plus $433.

USDA – 195,375, minus $1.225

VA – $272,250, minus $3,081

NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,800+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at