The percentage of first-time buyers entering the single-family home market fell in the second quarter even as housing became more affordable.
The pace of home sales growth for first-time homebuyers slowed as single-family home purchases went down 4% to a seasonally adjusted annual rate of 1.94 million, according to the First-Time Homebuyer Market Report from Genworth Mortgage Insurance.
First-time homebuyers represented 55% of new purchase borrowers and 36% of the consumers who bought the 559,000 single-family homes sold in Q2 2018.
"The contraction in the number of first-time homebuyers came as a surprise because the overall housing market has seen a moderate rebound compared to Q4 2018," said Genworth Chief Economist Tian Liu.
Forty-three states experienced a slowdown this year, compared to 39 states in the first quarter of last year.
Despite the downturn, housing affordability kept on improving. Slackening home-price growth and dropping mortgage rates spurred the increase, according to Liu.
"Housing affordability continued to improve, driven mainly by falling mortgage rates, and also was supported by falling home-price growth and faster wage growth,” he said. “While falling mortgage rates are the result of higher economic uncertainties, and could negatively affect buyer confidence, they are still a net positive for the housing market in Q2.”
The report also showed that first-time homebuyers still prefer low down payments. Approximately 424,000 first-time buyers chose some form of low-down-payment mortgage product to finance their home purchases.
Low-down-payment conventional mortgages were a popular choice, with 201,000 first-time homebuyers using the products.
“Low-down-payment mortgages remain at the core of mortgage financing for first-time homebuyers, and we're continuing to watch the shift away from government loan programs toward conventional loans with low down payments," Lui said.