Chart of the Week: Top 8 FHA Homebuilder Originators
Source: Federal Housing Administration, Recursion Co.
The headwinds facing mortgage transactions continued unabated in 2024 as home prices reached new record highs while the 30-year mortgage rate rose back over 7%. One sector that effectively dealt with these impediments was the homebuilders. In Q3 2024 the top 8 homebuilders originated 9.53% of FHA purchase loan originations, more than three times the 3.3% share in place in Q3 2021.
In terms of the homebuilder mortgage “league table,” there has been remarkably little change observed over the past three years. The top two builders in Q3 2024 were DHI and Lennar, with builder shares of 51.1% and 24.2%, respectively. The top two builders in Q3 2021 were the same, with shares of 56.2% and 21.2%, respectively.
The question arises as to how the builders have gained share in this environment. The weighted average loan rate between FHA purchase loan originations and those of nonbuilders has progressively widened since mortgage rates started to rise in 2022. The spread went from essentially zero at the end of 2021 to 1.3% in Q4 2023 before falling back slightly to 1.1% in Q3 2024. This spread can be attributed to two factors: the subsidy provided by the home builders to their mortgage arms, enabling them to provide lower than market rate; and the “discount points” option, where borrowers pay a one-time upfront fee to the lender in exchange for a permanently reduced mortgage interest rate. The calculation behind whether builders offer buydowns or discounted points depends on factors such as an inherent interest in keeping prices steady in new developments to limit a broadening of price declines from spreading through comps.
Going forward, the environment for homebuilders is highly uncertain given policy questions such as the impact of tariffs on building costs and on the price and availability of construction labor due to immigration crackdowns.
For more information on these industry rankings and other available data from Recursion, please visit our website here.
Additionally, MBA members have access to a host of free data on this and other topics from MBA Research and MBA associate members available here.
–Richard Koss (rkoss@recursionco.com), Sean Chang (schang@recursionco.com), Joel Kan (jkan@mba.org), Jenny Masoud (jmasoud@mba.org)
