First-time buyer market is improving says Genworth MI economist

The first quarter has seen a transition as mortgage rates have fallen

First-time buyer market is improving says Genworth MI economist

First-time buyers started the year with gloomy prospects as high mortgage rates at the end of 2018 dampened their enthusiasm.

But since then conditions have improved with lower mortgage rates boosting affordability according to the latest First-Time Homebuyer Market Report from Genworth Mortgage Insurance.

Compiled by Genworth MI’s chief economist Tian Liu, the report highlights that, although single-family home sales decreased 3% year-over-year in Q1 2019 (401,000), first-time homebuyers accounted for 38% of single-family homes sold and 57% of purchase mortgages originated.

Housing affordability in Q1 2019 improved with the average interest rates for first-time homebuyers down by 15 basis points to 4.89%, lagging the 41-basis point decrease in the Freddie Mac 30-year conventional mortgage rate.

"First-time homebuyers continue to represent a large part of the activity in the housing market despite the slowdown in the overall market," said Liu. “The first-time homebuyer market experienced further slowdowns due to worsening affordability from the past three years. However, affordability began to improve, and further decreases in interest rates in Q1 suggest that affordability will have more room to improve, significantly reducing the cause of the original slowdown.”

Low down payment, conventional
The report shows that 321,000 (80%) of homebuyers used some form of low down payment mortgages to finance their first home purchase, down 3% year-over-year.

Conventional mortgages helped 133,000 first-time homebuyers, outperforming any other product and the only segment in the mortgage market to report any year-over-year growth.

“Low down payment mortgage products remain critical in financing their first home purchase, and private mortgage insurance is now the undisputed leader in this market," added Liu.

 

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