Genworth: 2Q First-Time Homebuyer Purchases Grow

Genworth Mortgage Insurance, Richmond, Va., said despite slowing home sales, first-time homebuyer purchase grew in the second quarter, with conventional mortgages using private mortgage insurance becoming the largest source of credit to first-timers.

The company’s quarterly First-Time Homebuyer Market Report said first-time buyers purchased 572,000 single-family homes in the second quarter, a 1 percent increase from a year ago. For the first half of 2018, they purchased 985,000 single-family homes, flat from a year ago but still representing the most during that period since 2005.

And Genworth isn’t the only mortgage insurer reporting increases. Moody’s Investors Service, New York, reported private mortgage insurance rose to nearly $140 billion in the first half of 2018, a 14 percent jump from a year ago. New business volume rose to more than $80 billion in the second quarter, the first time it has reached that threshold since 2016.

Genworth Chief Economist Tian Liu said the totals were “impressive,” considering overall home sales declined by 2 percent during the second quarter, with unusually slow activity in June.

“The decrease in home sales was driven by an increase in both interest rates and home prices that together raised monthly mortgage payments for first-time homebuyers by 12.6 percent year over year,” Liu said. “Despite this, as well as a slowing in new home construction and a decrease in supply at every price point within the ‘affordable home range’ of $150,000 to $300,000, buyers under 35 years of age increased their homeownership rate, showing a determination and resiliency to become homeowners.”

Liu noted despite barriers such as low inventory, particularly in starter homes, first-time homebuyers have a “wide range” of low down payment mortgage products to help them become homeowners, accounting for 79 percent of all home purchase transactions. “Over the past few years, conventional loans with mortgage insurance have become increasingly popular,” he said. “This quarter, for the first time ever, it became the largest source of credit to first-time homebuyers.”

Other report highlights:

–First-time homebuyers purchased189,000 conventional mortgages with private mortgage insurance, the first time that sales of this product have outpaced other low-down payment options during a quarter.

–First-time homebuyers accounted for 36 percent of single-family homes sold and 55 percent of purchase mortgages originated.

–454,000 home sales to first-time homebuyers were financed by low down payment mortgages, the highest for a second quarter since this data series began.

–First-time homebuyers paid 0.47% more in interest rates during Q2’18 (4.77 percent) compared to Q2’17 (4.30 percent).

–Monthly mortgage payments for first-time homebuyers increased by 12.6 percent year-over-year.

–Homeownership rates for households under 35 years of age increased by 1.2 percent during the second quarter.

The report is based on a sample size of 22.7 million first-time homebuyers from government reports and industry data. It is available at https://miblog.genworth.com/first-time-homebuyer-market-report-08-18/.