New Report: First-Time Homebuyers Are Dominating the Housing Market
By Maggie Wilson @ Real Estate Daily
December 26, 2017

First-time homebuyer demand increased to its highest level in 17 years, according to the latest market report from Genworth Mortgage Insurance. In the third quarter of 2017, first-time buyers purchased 601,000 single-family homes, 6% more than the previous quarter and the highest it has been since 2000.

Key Takeaways

  • First-time homebuyers purchased 601,000 single-family homes in Q3 2017
  • They accounted for 40% of single-family homes sold in Q3 2017
  • This is their highest demand in 17 years, since Q3 2000

Brief

Genworth Mortgage Insurance just published its latest report on first-time homebuyers, which is drawn from a data set of 21 million first-time homebuyers over a 24-year span, according to Housing Wire.

The report showed the first-time homebuyers purchased 601,000 single-family homes in the third quarter of 2017, up a whole 6% from 567,000 homes the previous quarter. This marks the highest quarterly purchase volume since the third quarter of 2000.

“First-time homebuyers bought the most homes in a quarter since the third quarter of 2000, buoying the broader housing market that had slowed during this period, -1% growth compared to Q3 of 2016,” said Tian Liu, Genworth Mortgage Insurance chief economist. “The surge in first-time homebuyer demand, and the decline in overall purchases, was driven by supply-demand imbalances in today’s housing market.”

Compared to the broader market, first-time homebuyers accounted for 40% of all single-family home sales. In addition, they accounted for 56% of all purchase mortgages financed.

Repeat homebuyer demand, on the other hand, posted its first quarterly decline since 2011. Repeat buyers bought 888,000 homes in the third quarter of 2017, down 5% from the previous quarter.

“Supply shortages are making homes less affordable, reducing incentives to existing homeowners who want to upgrade,” Liu explains. “This was a leading cause of the 5% quarterly decline in repeat buyers, which contributed to the one percent decline in overall home sales. It shows that the housing market is not working for all homebuyers.”

Liu continued to say that first-time homebuyer demand has been sufficiently supported by a sense of urgency from continued rental and home price appreciation. “Increased supply of low down payment mortgage products has facilitated first-time homebuyers’ entry into the purchase market,” he said.

Many first-time homebuyers are also looking towards low-down payment options to balance out high prices. About 467,000 first-time homebuyers utilized low-down payment mortgages in the third quarter of 2017, which is the most since the third quarter of 1999.

“First-time homebuyer growth is shifting the mortgage industry landscape in favor of the private sector,” Liu said. “The private mortgage insurance industry was again the fastest-growing source of credit enhancement for first-time homebuyers within the mortgage industry.”

“In contrast, the FHA program is beginning to contract,” he added. “These trends suggest that the private mortgage insurance industry will likely become the largest source of credit enhancement for the first-time homebuyer market soon, taking over from the FHA.”