Use of FHA Loans Declines; VA Loan Use Up from Last Year

April 4, 2011

La Jolla, CA.--The share of borrowers using government-insured FHA home loans fell to its lowest level in 27 months in February, based on an analysis of 20 large housing markets nationwide. The trend likely reflects a combination of factors, including tighter lending criteria for the low-down-payment loans.

In February, 33.3 percent of the purchase mortgages used in those 20 metro areas were FHA-insured, down from 34.2 percent in January and 38.2 percent in February 2010, according to San Diego-based DataQuick Information Systems. Last month's figure was the lowest since FHA loans made up 33.0% of the purchase loan market in November 2008.

For the current housing cycle, FHA loans peaked at 41.1 percent of all home purchase loans in November 2009. Since then, FHA's share of purchase mortgages has eroded fairly steadily.

Regionally, FHA use in February varied from as little as 10.3 percent of all purchase loans in the Honolulu area to as much as 43.2 percent in the Orlando region. FHA loans have been very popular with first-time buyers and some move-up buyers in recent years. That's because the subprime lending meltdown and credit crunch of 2007 made non-government-insured home loans, especially low-down-payment mortgages, more difficult to obtain, making FHA the obvious choice for many.

The median price paid for a home bought with an FHA loan in February was $195,000, the same as in January but down 2.5 percent from $200,000 a year earlier. The median FHA purchase loan amount in February was $187,668, up slightly from $186,500 in January but down 4.4 percent from $196,278 a year ago. FHA, which stands for "Federal Housing Administration," has loan limits that vary by region, up to $729,750 in the nation's costliest housing markets.

The government's recent changes to qualifying standards for FHA mortgages, along with lenders' own requirements for these loans, are likely contributors to the gradual decline in the number and portion of buyers using the loans. Other factors would include the nation's weak job growth, concerns over job security, and the inability of many existing owners to sell their homes for enough to pay off their mortgage and buy another house.

Meanwhile, the use of another type of government-insured home purchase mortgage has increased slightly from a year ago in the combined 20-market area. VA loans (Department of Veterans Affairs) represented 6.4 percent of all home purchase loans made in February, virtually unchanged from 6.5 percent in January and up from 5.5 percent a year earlier. In recent years the peak for VA loans, which do not require a down payment if certain conditions are met, was 6.7 percent in December 2010.

Among the 20 metro areas, the percentage of purchase loans that were VA was highest in Honolulu (18.9%), San Diego (15.3%), Washington D.C. (13.8%), Seattle (10.6%) and Las Vegas (10.4%). VA use as a share of total purchase loans was lowest in the San Jose metro area (0.9%), New York (1.1%) and Los Angeles/Orange counties (2.4%).

Percentage of home purchase loans that were FHA

Metro area* Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Peak month since '07**
Baltimore 4.4% 14.2% 42.5% 44.0% 41.2% 50.8%
Chicago 2.4% 5.9% 34.0% 40.9% 35.4% 43.3%
Denver 5.7% 15.7% 40.3% 47.9% 35.9% 53.4%
Honolulu 0.2% 1.4% 9.9% 14.9% 10.3% 19.0%
Las Vegas-Paradise 1.0% 22.3% 45.2% 47.5% 41.8% 55.1%
Los Angeles/Orange 0.2% 2.0% 31.3% 33.1% 29.5% 33.1%
Miami 1.0% 6.6% 39.1% 45.8% 42.0% 47.1%
Nashville 9.0% 20.1% 38.0% 47.1% 39.1% 53.8%
New York 1.3% 4.7% 22.1% 23.0% 22.0% 29.5%
Orlando 0.9% 12.7% 40.5% 45.7% 43.2% 49.9%
Phoenix 2.1% 20.7% 40.4% 41.3% 33.7% 55.3%
Portland 1.3% 8.1% 29.6% 37.3% 32.6% 42.3%
Riverside, CA 0.5% 16.2% 49.1% 47.2% 40.8% 51.1%
Sacramento, CA 0.3% 11.6% 37.1% 45.3% 35.7% 45.3%
San Diego 0.3% 2.8% 28.0% 29.2% 24.4% 31.3%
San Francisco 0.0% 1.1% 22.0% 25.5% 22.2% 26.3%
San Jose, CA 0.0% 0.0% 17.3% 18.9% 16.5% 22.3%
Seattle 0.8% 7.1% 31.0% 34.2% 30.1% 39.9%
Tampa 1.8% 15.6% 37.2% 37.6% 34.6% 45.7%
Washington D.C. 1.1% 10.5% 40.1% 43.3% 37.3% 45.8%

 

Percentage of home purchase loans that were VA

Metro area* Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Peak month since '07**
Baltimore 1.6% 4.3% 6.5% 9.2% 9.9% 10.7%
Chicago 0.5% 0.9% 1.9% 1.8% 2.8% 3.4%
Denver 1.4% 2.9% 6.0% 5.3% 6.6% 7.3%
Honolulu 5.3% 10.9% 23.1% 15.4% 18.9% 23.1%
Las Vegas-Paradise 1.1% 5.5% 10.3% 9.8% 10.4% 11.4%
Los Angeles/Orange 0.1% 0.4% 2.0% 2.2% 2.4% 2.6%
Miami 0.2% 0.6% 2.3% 2.7% 2.2% 3.8%
Nashville 2.2% 2.1% 4.9% 4.3% 6.0% 6.7%
New York 0.1% 0.4% 0.8% 0.6% 1.1% 2.1%
Orlando 0.7% 2.5% 5.3% 4.9% 4.9% 7.0%
Phoenix 1.2% 3.5% 6.2% 5.9% 6.6% 7.6%
Portland 1.2% 2.0% 4.9% 5.6% 5.5% 9.1%
Riverside, CA 0.3% 3.9% 6.7% 7.6% 8.2% 8.5%
Sacramento, CA 0.3% 2.4% 4.0% 4.3% 4.7% 5.3%
San Diego 0.3% 3.1% 15.0% 11.9% 15.3% 15.3%
San Francisco 0.1% 0.1% 2.1% 1.3% 2.1% 2.1%
San Jose, CA 0.0% 0.1% 1.0% 0.8% 0.9% 1.8%
Seattle 1.4% 3.6% 10.3% 8.6% 10.6% 11.3%
Tampa 1.8% 4.3% 9.9% 9.2% 9.1% 11.1%
Washington D.C. 1.4% 5.6% 12.3% 10.9% 13.8% 13.9%

*Includes all or at least the core counties in each metro area.
**Peak month could include any calendar month; not just February.
Note: Feb. '11 data are preliminary for Washington D.C., New York and Tampa.

Source: DataQuick Information Systems

Media calls: Andrew LePage (916) 456-7157

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