Genworth: First-Time Homebuyer Market More Resilient than Repeat Buyer Market

Genworth, Richmond, Va., said despite a moderate but broad slowdown in the housing market in the third quarter, the first-time home buyer market proved resilient compared to the repeat buyer market.

“The biggest surprise in this report is that despite the slowdown in the housing market, the number of first-time homebuyers increased from a year ago,” wrote Genworth Chief Economist Tian Liu in the company’s quarterly First-Time Homebuyer Market Report. “This is a reminder that first-time homebuyers differ from other buyer groups in terms of why they buy.”

The report ( noted in the third quarter, the housing market experienced a moderate but broad slowdown. The slowdown resulted in lower sales of new and existing homes, a slight increase in housing inventory and supply, lower growth in new single-family home construction and slower home price growth.

Despite this, the report said, first-time homebuyers continued to be very active in the housing market. “Many have spent years renting, and are now reaching the time in their life where renting no longer makes sense,” Liu said. “This helps the first-time homebuyer market stay strong in the face of falling affordability.”

The report also noted the relative strength in the first-time homebuyer market has been beneficial to the private mortgage insurance industry–the industry saw a 17% year-over-year increase in the number of first-time homebuyers. Low down payment conventional loans with private mortgage insurance were the largest source of credit for first-time homebuyers this quarter.

However, the report said the housing slowdown has had a bigger impact on repeat homebuyers, resulting in lower sales to those homebuyers. The part of the housing market that primarily serves repeat homebuyers has also been hit hard. For example, the home building industry saw sales fall in every price point above $300,000 this quarter.

“That largely explains why home builder confidence has weakened in recent months and may lead to lower levels of housing construction,” Liu said. “The home building industry may also want to look at expanding the number of homes built for first-time homebuyers.”

Liu added analysts should not mistake resilience in the first-time homebuyer market for indifference. “First-time homebuyers are still concerned about the rapidly rising cost of buying a home,” he said. “Since the second half of 2017, the year-over-year growth in home sales to first-time homebuyers has slowed to less than 3%. First-time homebuyers are searching for ‘affordable options’ that may come in the form of lower-priced homes–that may be smaller, with fewer features and further away from work and amenities–to stay within budget.”

Furthermore, Liu said, the report the fundamentals of the current housing cycle, such as a strong labor market, younger households reaching homebuying age and the return of first-time homebuyers who delayed purchasing a home over the past 10 years, are still in place.

“It shows that many younger consumers still have enough income to buy a home and remain confident about the economy and housing market after more than nine years of economic expansion,” Liu said. “However, rising interest rates, higher home prices and supply constraints also are symptomatic of the challenges facing the wider economy at this stage of the economic cycle. It is presenting tough choices for many aspiring first-time homebuyers, forcing them to search for more affordable homes and slowing their path to homeownership. These two opposing forces are at play across the country, resulting in more diverging trends. Affordability will likely remain the number one issue facing the housing market.”