Mike Sorohan firstname.lastname@example.org
August 31, 2017
First-time homebuyers purchased 570,000 single-family homes in the second quarter, up from 426,000 last quarter, as builders make more lower-priced homes available, said Genworth Mortgage Insurance, Richmond, Va.
The quarterly Genworth First-Time Homebuyer Market Report said second-quarter purchased marked the highest number of first-time homebuyer purchases during a second quarter since 1999 (599,000). It noted while the number of single-family home sales increased by just 2 percent during the quarter from a year ago, purchase mortgage origination increased by 5 percent, and sales and mortgages made to first-time homebuyers increased by 8 percent, resulting in a higher first-time homebuyer mix in both markets.
Genworth said first-time homebuyers accounted for 36 percent of all single-family homes sold during the second quarter, up from 34 percent a year ago. In the mortgage market, they accounted for 57 percent of all purchase mortgages originated, up from 56 percent a year ago. This compares to historic norms, where first-time homebuyers have accounted for 35 percent of single-family housing market and 45 percent of the purchase mortgage market.
“The rapid growth in the first-time homebuyer market that began in 2015 continued into the second quarter,” said Genworth Chief Economist Tian Liu. “As the housing market matures, first-time homebuyers are becoming an even more important source of growth. Whether one looks at the three million missing first-time homebuyers since 2007 or the historically low homeownership rate among young households, the potential growth opportunity remains large and will likely take years to play out. The current housing cycle will be defined by first-time homebuyers.”
Genworth said a key driver was an improved effort by home builders to build more single-family homes priced between $200,000 and $250,000, the segment most popular with first-time homebuyers. This was the fastest-growing segment for home builders, accounting for 36 percent of all homes purchased during the second quarter and 33 percent year-over-year growth.
However, the report noted while home builders have increased their focus on building homes within this price range, volume growth has still not caught up due to a low starting level, growing modestly by 13,000 units in the first half of the year.
“As first-time homebuyers continue outpacing the rest of the single-family homes market, home builders have begun adjusting their products further down the pricing curve,” Liu said. “However, the growth in supply has not been sufficient enough to offset the supply-demand imbalance, leaving many potential first-time homebuyers still frozen out of the market.”
The report also acknowledged the supply shortage of new, affordable starter homes has also led to a sharp decline in vacant homes for sale, sending the homeowner vacancy rate during the second quarter into its lowest level since 1994, which will likely continue to drive home price appreciation.
The report said first-time homebuyers continued to rely on low-down payment mortgages during the second quarter, financing 448,000 homes, or 78 percent of all purchases, a year-over-year increase of 8 percent, exceeding the growth in the purchase origination market.
“Faster growth in the low down payment mortgage market is primarily the result of an expanding first-time homebuyer market, rather than a relaxation of lending standards,” Liu said. “As long as the expansion in the first-time homebuyer market continues, low down payment mortgages will continue to outpace the rest of the mortgage market.”
Among the low down payment products utilized by first-time homebuyers, conventional loans with 97 LTVs became more popular with both lenders and borrowers. Year over year, first-time homebuyer purchases using private mortgage insurance increased by 163,000, or 17 percent. During the second quarter, 58 percent of growth in first-time homebuyer purchases came from the private mortgage insurance market, compared to 9 percent coming from FHA products.