Genworth: ‘Sharp Slowdown’ in First-Time Homebuyer Market
The COVID-19 recession triggered a sharp slowdown in first-time homebuyer activity in the second quarter, reported Genworth Mortgage Insurance, Raleigh, N.C.
“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March,” said Genworth Mortgage Insurance Chief Economist Tian Liu. He noted the housing market also began correcting in April, resulting in an 18 percent decrease in the number of first-time homebuyers in the second quarter compared to first-quarter 2020. But a quick rebound in May moderated the market decline.
“Overall, the housing finance system was able to maintain credit availability for first-time homebuyers during the COVID-19 pandemic given the enormous challenges,” said Liu. “The percentage of home sales to first-time homebuyers did not decrease from its pre-COVID-19 levels.”
Liu said private mortgage insurance “played a significant role” in maintaining credit availability, financing more than 200,000 first-time homebuyers, or nearly four of every ten first-time homebuyers. “Credit availability did contract more noticeably for FHA loans and conventional loans not backed by Fannie Mae and Freddie Mac,” he said. “This may have had a bigger impact on borrowers with weaker credit histories.”
The main reasons the housing finance system has largely maintained credit availability for first-time buyers included prudent underwriting, having adequate capital in the financial system, a significant presence for the agency market that will take credit risk during periods of market stress and continued investment in technology to make the industry capacity more elastic, Liu said.
There was a stronger rebound in repeat buyers, Genworth reported. This suggests homeowners may be reassessing their housing needs to take into account how likely a continued work-from-home arrangement and online education for their children will be.