There were fewer first-time homebuyers amid housing slowdown in the fourth quarter of 2018.
Fully 480,000 single-family homes were purchased—a decline of three percent from a year ago, compared to a one percent increase in the third quarter, according to the First-Time Homebuyer Market Report from Genworth Mortgage Insurance.
"The first-time homebuyer market once again outperformed the broader housing market, recording its best purchase year since 2006 and regaining its pre-housing crisis level,” said Tian Liu, chief economist for Genworth Mortgage Insurance. “First-time homebuyers responded to declining affordability by taking a wait-and-see approach and opportunistically looking for lower-priced properties.”
The first-time homebuyer market was more resilient during the housing slowdown compared to repeat buyers, which saw a decline of seven percent. In fact, first-time homebuyers accounted for 39 percent of single-family homes sold in 2018, up from 31 percent in 2014; 56 percent of new purchase loans in 2018, up from 52 percent in 2014; Highest level of first-time homebuyer mix in the housing market since 2000.
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Housing affordability deteriorated by 17 percent in the fourth quarter from a year ago, due to rising interest rates and higher home values. Homebuyers have reacted to the worsening affordability by putting off buying and looking for lower-priced homes, which resulted in lower prices for first-time homebuyers in the fourth quarter. For instance, the median price paid by first-time homebuyers declined by two percent year-over-year to $233,600.
Over two million first-time homebuyers purchased single-family homes in 2018, up less than one percent from 2017, and the most since 2006.
They accounted for 99 percent of the growth in home sales between 2014 and 2018. First-time homebuyers are reshaping the demographics by moving from states, such as California, Illinois, Massachusetts, Michigan, Louisiana, New York and Texas, and into states such as Arizona, Florida, Georgia, Delaware, Idaho and Nevada
Fully 682,000 homebuyers used conventional mortgages with mortgage insurance to finance their first home purchase in 2018, 53,000 more than the federal housing authority, historically the largest first-time homebuyer product. The mortgage insurance industry now serves twice as many first-time homebuyers compared to 2014.
