Despite the cross currents of rising interest rates and home prices, first-time homebuyers have outperformed the broader market.

They recorded their best first nine months in 13 years and showed the current housing cycle's fundamentals remain strong despite a broader slowdown in activity, according to the First-Time Homebuyer Market Report from Genworth Mortgage Insurance.

At the same time, first-time homebuyers are not immune to declining affordability, and the market has declined in 19 states. First-time homebuyers adjusted to declining affordability by buying cheaper homes,” said Tian Liu, chief economist at Genworth Mortgage Insurance.  New homes between $200,000 and $300,000, where there are more first-time buyers, saw a 15 percent increase, while those priced between $300,000 and $750,000, where there are more repeat buyers, saw declines ranging from 3 percent to 12 percent.

Additional highlights from the survey are as follows:

• Single-family home purchases increase
  • 3Q'18: 582,000 single-family homes were purchased – a one percent year-over-year increase.
  • 9M'18: 1,580,000 single-family homes were purchased – the most during the first nine months of a year since 2005.
  • Larger Share: First-time homebuyers accounted for 40 percent of single-family homes sold and 55 percent of purchase mortgages originated, both higher than a year ago.
  • Diverging Trends Across States: Unlike the 2014-17 period when almost all states reported more first-time homebuyer activities, only two-thirds of states reported growth in Q3
• Lower housing affordability: Monthly mortgage payments for first-time homebuyers increased by 15 percent year-over-year from higher interest rates (up eight percent more) and higher home prices (up over six percent).
• Homebuyers Favoring Lower-Priced Homes: Prices for the most expensive 40 percent of homes bought by first-time homebuyers declined for the first-time since 2013-14.
• Sales of Affordable New Homes Grew: New homes priced between $200,000 and $300,000 were one of the few price segments to show year-over-year growth, up by 15 percent, while demand for homes priced between $300,000 and $750,000 decreased by five percent.
• PMI Most-Sold Product: 202,000 homebuyers used conventional mortgages with private mortgage insurance to finance their first home purchase, a 17 percent year-over-year increase. For two consecutive quarters conventional loans with mortgage insurance were the single-largest source of credit for first-time homebuyers.
• Low Down Payments Still Preferred: 463,000 (80 percent) of homebuyers used low down payment mortgages to finance their first home purchase.
• Young Homeowner Demand Grows: Homeownership rates for households under 35 years of age increased by 1.2 percent during the third quarter.