At a moment when overall home sales are slowing, the first-time homebuyers market is hot. First-timer demand in the third quarter hit its highest level since the same quarter of 2000, Genworth Mortgage Insurance reported Tuesday.
First-timers bought 601,000 single-family homes during the July-to-September period, compared with 567,000 during the third quarter of 2016, an increase of 6%.
These homebuyers accounted for 40% of all single-family homes sold and 56% of all purchase mortgages financed.
According to Tian Liu, chief economist at Genworth Mortgage Insurance, first-time homebuyers buoyed the broader housing market, which contracted 1% from a year earlier.
“The surge in first-time homebuyer demand, and the decline in overall purchases, was driven by supply-demand imbalances in today’s housing market,” Liu said in a statement.
Genworth’s third-quarter report drew on a data set of 21 million first-time homebuyers over a 24-year period.
The report said repeat homebuyer demand declined for the first time since 2011. This group purchased 5% fewer homes during the third quarter than a year ago.
The main reason, Liu said, was that supply shortages were making homes less affordable, reducing incentives to existing homeowners who want to upgrade. “It shows that the housing market is not working for all homebuyers,” he said.
As supply shortages continue to inflate home pricing, first-time buyer demand continues to increase because of a greater sense of urgency from rental and home price inflation, and greater housing need due to family formation. “First-time homebuyers see more value in homeownership beyond a simple financial return on their investment,” Liu said.
Mortgage Industry Shift