Genworth: 2018 ‘Best Purchase Year for First-Time Homebuyers since 2006′

Genworth Mortgage Insurance, Richmond, Va., released its quarterly First-Time Homebuyer Market Report, showing 2.07 million first-time homebuyers purchased single-family homes in 2018, the most since 2006.

“The first-time homebuyer market was more resilient during the housing slowdown compared to repeat buyers, which saw a decline of seven percent,” said Genworth Chief Economist Tian Liu.

The report said first-time homebuyers accounted for 39 percent of single-family homes sold in 2018, up from 31 percent in 2014; and 56 percent of new purchase loans in 2018, up from 52 percent in 2014, representing the highest level of first-time homebuyer mix in the housing market since 2000.

However, the report noted a slowdown in the fourth quarter, reflected by a large increase of states reporting lower numbers of homebuyers: 19 states in Q3 compared to 35 in Q4. Housing affordability deteriorated by 17 percent in Q4 from a year ago, due to rising interest rates and higher home values

“Homebuyers have reacted to the worsening affordability by putting off buying and looking for lower-priced homes, which resulted in lower prices for first-time homebuyers in Q4,” Liu said. The report said this point is illustrated by lower prices paid by about 80 percent of all homebuyers and 70 percent of first-time homebuyers compared to a year ago. The median price paid by first-time homebuyers declined by 2 percent year-over-year to $233,600.

For the full year, however, the report showed strength. First-time homebuyers accounted for 99 percent of the growth in home sales between 2014 and 2018. “They are reshaping the demographics by moving from states such as California, Illinois, Massachusetts, Michigan, Louisiana, New York and Texas, and into states such as Arizona, Florida, Georgia, Delaware, Idaho and Nevada,” the report said.

The report also noted 682,000 homebuyers used conventional mortgages with PMI to finance their first home purchase in 2018, 53,000 more than the FHA, historically the largest first-time homebuyer product; PMI industry now serves twice as many first-time homebuyers compared to 2014

“The first-time homebuyer market once again outperformed the broader housing market, recording its best purchase year since 2006 and regaining its pre-housing crisis level,” Liu said. “At the same time, first-time homebuyers are not immune to declining affordability, as their number declined nationally and in 35 states in Q4. First-time homebuyers responded to declining affordability by taking a wait-and-see approach and opportunistically looking for lower-priced properties.”

Liu said looking ahead, some first-time homebuyers “could be in fear of overpaying during the slowdown which could prolong the slowdown. However, the improved housing affordability in the past two months, if sustained, may boost momentum by the 2019 spring selling season, which could, in turn, lead to better housing data and lift confidence in the market. In the longer term, the current slowdown should serve to remind the housing industry and policymakers of the importance of housing affordability. The housing industry should also take note of the resilience of the first-time homebuyer market in the downturn and offer more products and services to meet their needs.”