Genworth: First-Time Homebuyers Pull Back For First Time Since 2014
Genworth Mortgage Insurance, Richmond, Va., said its First-Time Homebuyer Market Report showed first-time homebuyers purchased 411,000 single-family homes in the first quarter, down by 2 percent from a year ago.
“This quarter’s decline in first-time homebuyer sales reflects a slowdown in cyclical momentum as the first-time homebuyer market approached its historical norms,” said Genworth Chief Economist Tian Liu. “It also reflects a shortage of available homes priced at or below the median first-time homebuyer market price of $250,000. While for the first time since 2014 first-time homebuyer demand is slightly easing, supply pressures will continue to drive price appreciation and freeze out a large percentage of the 2.7 million first-time homebuyers who are still missing from the market.”
Other report highlights:
–First-time homebuyers accounted for 37 percent of single-family homes sold and 57 percent of purchase mortgages financed.
–Home sales without financing (all-cash transactions) and purchase loans made by investors were up 11,000 units, or 3 percent, from a year ago suggesting an increase in speculative demand and otherwise a more competitive environment among potential homebuyers.
–For the first time since the first quarter of 2012, home sales grew faster than home purchase originations. The number of purchase loans for the purchase of owner-occupied homes were down 2 percent from a year ago, while home sales stayed flat.
–81 percent of first-time homebuyers used low down payment mortgages, while only 19 percent used high down payment mortgages.
–Low down payment mortgages financed 332,000 home sales to first-time homebuyers, a one percent decline from a year ago, and represented 69 percent of purchase loans originated, the highest since first quarter 2010.
–Conventional loans with mortgage insurance financed 127,000 home sales to first-time homebuyers, an18 percent increase from a year ago, marking the 27th consecutive quarter of growth for the mortgage insurance industry and the best first quarter since 1995.
–Among new single-family homes, homebuilders reported rapid sales growth in homes priced between $250,000 and $300,000, an increase of 17 percent from first quarter 2017 (the median first-time homebuyer price range is $250,000 and below).
Liu said the housing market is becoming “overheated,” supported by this quarter’s growth of all-cash transactions and purchase loans made by investors, and the corresponding decrease in first-time homebuyers.
“It is becoming increasingly common to see multiple offers submitted on a property, which results in purchase prices surpassing listing prices, as well as inflated home prices, making cash offers more coveted,” Liu noted. “Because first-time homebuyers prefer using debt over cash when purchasing a home, this quarter’s surge in cash purchases is a competitive disadvantage to them and helps explain their pull-back.” However, Liu said he is not overly concerned by this quarter’s slow-down in first-time homebuyer purchase growth and remains optimistic that this demographic will continue dominating the mortgage market and growing its market share.
