3Q18 home sales to first-time homebuyers outperformed overall market;
First-time homebuyers purchasing lower-priced homes
RICHMOND, Va., Dec. 12, 2018 /PRNewswire/ — Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. (NYSE: GNW), today released the First-Time Homebuyer Market Report from its Chief Economist, Tian Liu, for the third quarter of 2018. The report aggregates all publicly available government data and proprietary mortgage industry data into one dataset. The below highlights are followed by Liu’s analysis, and the full report can be downloaded at https://miblog.genworth.com/first-time-homebuyer-market-report-12-18/.
Overview
- Single-family home purchases increase
- 3Q’18: 582,000 single-family homes were purchased – a one percent year-over-year increase
- 9M’18: 1,580,000 single-family homes were purchased – the most during the first nine months of a year since 2005
- Larger Share: First-time homebuyers accounted for 40 percent of single-family homes sold and 55 percent of purchase mortgages originated, both higher than a year ago
- Diverging Trends Across States: Unlike the 2014-17 period when almost all states reported more first-time homebuyer activities, only two-thirds of states reported growth in Q3
- Lower housing affordability: Monthly mortgage payments for first-time homebuyers increased by 15 percent year-over-year from higher interest rates (up eight percent more) and higher home prices (up over six percent)
- Homebuyers Favoring Lower-Priced Homes: Prices for the most expensive 40 percent of homes bought by first-time homebuyers declined for the first-time since 2013-14
- Sales of Affordable New Homes Grew: New homes priced between $200,000 and $300,000 were one of the few price segments to show year-over-year growth, up by 15 percent, while demand for homes priced between $300,000 and $750,000 decreased by five percent
- PMI Most-Sold Product: 202,000 homebuyers used conventional mortgages with private mortgage insurance to finance their first home purchase, a 17 percent year-over-year increase. For two consecutive quarters conventional loans with mortgage insurance were the single-largest source of credit for first-time homebuyers
- Low Down Payments Still Preferred: 463,000 (80 percent) of homebuyers used low down payment mortgages to finance their first home purchase
- Young Homeowner Demand Grows: Homeownership rates for households under 35 years of age increased by 1.2 percent during the third quarter
Comments from Tian Liu, Chief Economist, Genworth Mortgage Insurance
“The first-time homebuyer market report brings additional state-level and price-point data into focus this quarter. The goal remains helping the housing industry and policymakers understand first-time homebuyers, which accounted for 40 percent of single-family home sales and 55 percent of purchase loans. The focus this quarter is on first-time homebuyers’ response to rising interest rates and rising home prices, which has reduced affordability and contributed to the slowdown in the housing market.
The first-time homebuyer market once again outperformed the broader market, recording their best first nine months in 13 years and showing that the current housing cycle’s fundamentals remain strong despite a broader slowdown in activity.
At the same time, first-time homebuyers are not immune to declining affordability, and the market has declined in 19 states. First-time homebuyers adjusted to declining affordability by buying cheaper homes. In previous quarters, that showed up as stronger home price gains at the lower end. This quarter, instead, home prices declined at the higher end – for the first time since the 2013-14 “Taper-Tantrum” event. This bears monitoring since lower prices and weaker demand could cascade into the first-time homebuyer market at the lower end.
A more resilient first-time homebuyer market and a move by homebuyers toward lower-priced homes also affected the new construction market. New homes between $200,000 and $300,000, where there are more first-time buyers, saw a 15 percent increase, while those priced between $300,000 and $750,000, where there are more repeat buyers, saw declines ranging from 3 –12 percent.
Low down payment mortgages, and conventional loans with private mortgage insurance in particular, play a very important role in supporting first-time homebuyers, and even more so in a market with declining affordability. The success of the private mortgage insurance industry, which for the second consecutive quarter financed the most first-time homebuyers, demonstrates the large business opportunities it offers to the housing industry.”
About Genworth’s First-Time Homebuyer Market Report
The First-Time Homebuyer Market Report is the only economic series measuring the number of home sales and mortgages to first-time homebuyers covering the entire housing market. This report provides quarterly estimates of the first-time homebuyer market since the first quarter of 1994—spanning two housing cycles and 24 years. It provides a historical perspective necessary to understand today’s first-time homebuyer market. It is based on a sample size of 23.2 million first-time homebuyers from government reports and industry data. By capturing the entire market over a long period, and providing the latest market snapshot, this report makes the first-time homebuyer market more visible to housing industry participants and policymakers.
For access to the full report, visit: https://miblog.genworth.com/first-time-homebuyer-market-report-12-18/
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 insurance holding company committed to helping families achieve the dream of homeownership and address the financial challenges of aging through its leadership positions in mortgage insurance and long term care insurance. Headquartered in Richmond, Virginia, Genworth traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com.
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Disclaimer
Opinions, analyses, estimates, forecasts, and other views included in these materials are those of Tian Liu, are based on current market conditions and are subject to change without notice, do not necessarily represent the views of Genworth or its management, and should not be construed as indicating Genworth’s business prospects or expected results. Neither Tian Liu nor Genworth guarantees that the information provided in these materials is accurate, current, or suitable for any particular purpose. Forward looking statements should not be considered as guarantees or predictions of future events.
SOURCE Genworth Financial, Inc.