COVID-19 has significantly impacted the first-time homebuyer market, as the number of rate locks by potential first-time homebuyers decreased by 27% in April from March. The spread of COVID-19 reduced traffic by potential homebuyers and listings. Some states like New York, Pennsylvania and Michigan were heavily impacted. That’s according to Genworth Mortgage Insurance’s Chief Economist, Tian Liu.
The dislocation was even greater for the repeat buyers’ market, which fell by 34%, in part, because repeat buyers faced greater hurdles in selling their existing homes. The COVID-19 pandemic has resulted in tighter credit availability in the housing market, which led to a sharp contraction in first-time homebuyers with riskier credit profiles or relying on mortgages not backed by Fannie Mae and Freddie Mac.
The number of first-time homebuyers taking out FHA loans decreased by 36% in April, and the market for jumbo loans decreased by 50%. The number of first-time homebuyers using other products have seen smaller declines in April. For example, the number of first-time homebuyers using mortgage insurance decreased only by 18% in April, and those using VA loans decreased by 23%.
As the economy re-opened in May, the first-time homebuyer market rebounded by 27%. The repeat buyers’ market rebounded by 37% in May as existing homeowners came back to the market. The number of first-time homebuyers rebounded across all mortgage products, with jumbo loan borrowers up 41%, FHA loan borrowers up 29% and low down payment conventional loan borrowers up 24%.
“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March,” said Tian Liu, chief economist at Genworth Mortgage Insurance. “The housing market corrected in April, with first-time homebuyer activities down almost 30% in just one month. However, what followed was a quick rebound in May of almost the same magnitude. This is not what we typically see in a normal recession.”