Housing demand among first-time homebuyers eased during the first quarter for the first time since 2014 in part due to a shortage of available homes priced at or below the median first-time homebuyer market price of $250,000, according to the First-Time Homebuyer Market Report released by Genworth Mortgage Insurance.
Aggregated government and mortgage industry data revealed a 2% decline in the number of single-family homes purchased by first-time homebuyers to 411,000 from the first quarter of 2017. First-time homebuyers accounted for 37% of single-family homes sold and 57% of purchase mortgages financed.
During the quarter, 81% of first-time homebuyers used low-down-payment mortgages, while only 19% used high-down-payment mortgages. The report found a 1% year-over-year decline in the number of low-down-payment mortgages financed to first-time homebuyers to 332,000 home sales. Despite the decline, the total mortgages represented 69% of purchase loans originated, the highest since the first quarter of 2010.
"This quarter's decline in first-time homebuyer sales reflects a slowdown in cyclical momentum as the first-time homebuyer market approached its historical norms,” Genworth Mortgage Insurance Chief Economist Tian Liu said. “It also reflects a shortage of available homes priced at or below the median first-time homebuyer market price of $250,000. While for the first time since 2014 first-time homebuyer demand is slightly easing, supply pressures will continue to drive price appreciation and freeze out a large percentage of the 2.7 million first-time homebuyers who are still missing from the market.”
Genworth believes the housing market is overheating as the quarter saw an increase in all-cash transactions and purchase loans made by investors coupled with a decline in first-time homebuyers. Liu said these buyers are a disadvantage in a competitive market that covets cash offers over debt.
Despite the slowdown, Liu said Genworth is not overly concerned and remains optimistic that first-time homebuyers will continue dominating the mortgage market and growing its market share.
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