Genworth: First-Time Home Buyer Market Slows in 1Q, But Still Outperforms

Genworth Mortgage Insurance Corp., Richmond, Va., said the first-time home buyer market continued to slow down in the first quarter, although it still outperformed the rest of the market.

The company’s quarterly First-Time Homebuyer Report said first-time home buyers purchased 401,000 single-family homes in the first quarter, down 3 percent from a year ago, marking the first back-to-back decline in that market this cycle, dating back to 2011.

Genworth Chief Economist Tian Liu noted the slowdown in the first-time homebuyer segment was less pronounced as compared to other buyers, however. For example, home sales to repeat buyers fell by six percent year over year, and sales to cash buyers were down by seven percent.

“This is a reminder that first-time homebuyers differ from other buyer groups in terms of why they buy,” the report said. “Their purchase decisions are more likely driven by the fact that many are starting families and reaching their early-30s, historically the peak home-buying ages. In fact, the importance of first-time homebuyers has increased during the past two quarters as sales to other homebuyers have slowed even more.”

The report said 38 states reported fewer first-time homebuyers in the first quarter, compared to 31 states in the fourth quarter. Arizona, Florida and Georgia, for example, which had reported flat or growing numbers of first-time homebuyers last quarter, reported fewer first-time homebuyers in the first quarter compared to a year ago. Only 14 states, including North Carolina, Iowa and Connecticut, reported more.

The report noted besides affordability challenges, the government shutdown in January also contributed to the slowdown in the first-time homebuyer market by disrupting lending programs such as USDA’s Single-Family Housing Loan Guarantee Program, which reported 6,000 fewer first-time homebuyers in the first quarter compared to a year ago, a 30 percent decline. “But the impact of the government shutdown on the overall first-time homebuyer market appears to have been modest,” Genworth said.

“While sales to first-time homebuyers continued to slow in Q1, we believe that the rebound in housing affordability is continuing as lower interest rates at the end of Q1 are passed to borrowers and interest rates on government loans catch up to those on conventional loans,” Liu said. “Home price growth also has cooled in the past few months as housing demand has slowed while inventory has increased. Wage growth also has accelerated, giving potential homebuyers more purchasing power.”

If affordability continues to improve, Liu added, “it should help both first-time homebuyers and repeat buyers in the current home selling season. That being said, inventory also remains quite low in Q1, and could easily fall again once demand recovers.”