New entrants to the housing market bought 570,000 single family homes in Q2, up from 426,000 in the first quarter of 2017. In the second quarter of 1999, 599,000 first time buyers entered the market according to data from Genworth Mortgage Insurance.
The data shows that purchase mortgage origination was up 5% in the second quarter with sales and mortgages to first-time buyers increasing 8%.
First-timers accounted for 57% of all purchase mortgages originated, up 1 percentage point year-over-year. Genworth says the historic average is 45%.
First time homebuyers accounted for 36% of single family homes sold during the second quarter, up 2 percentage points from a year earlier, but roughly in line with historic averages.
“The rapid growth in the first-time homebuyer market that began in 2015 continued into the second quarter. As the housing market matures, first-time homebuyers are becoming an even more important source of growth," said Tian Liu, Chief Economist for Genworth Mortgage Insurance.
"Whether one looks at the three million missing first-time homebuyers since 2007 or the historically low homeownership rate among young households, the potential growth opportunity remains large and will likely take years to play out. The current housing cycle will be defined by first-time homebuyers," added Liu.
Although still constrained by supply issues, first time buyers are finding more choice as builders focus on homes priced between $200,000 and $250,000. Homes at this price point accounted for more than a third of all purchases during the second quarter.
Liu says that 78% of purchases in Q2, 2017 were financed with low downpayment mortgages, with an 8% rise year-over-year.
"Faster growth in the low down payment mortgage market is primarily the result of an expanding first-time homebuyer market, rather than a relaxation of lending standards," said Liu. "As long as the expansion in the first-time homebuyer market continues, low down payment mortgages will continue to outpace the rest of the mortgage market."
Genworth expects growth in outstanding mortgage debt to increase at a faster pace than the 1-2% seen in 2015 and 2016.
More market update:
The second quarter of 2017 saw the highest number of first-time homebuyer purchases during a second quarter since 1999.