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The First-Time Homebuyer Impact

shutterstock_187662284 (1)The first-time homebuyer market is growing faster than other buyer demographics, according to the latest Genworth Mortgage Insurance’s First-Time Homebuyer Market Report.

The report finds four key takeaways for this quarter. First, purchase mortgages continue to grow—particularly those with less than a 20 percent down payment. Second, the supply of new single-family homes priced under $250,000 is not growing.

Third, low down payment mortgage loans for first-time homebuyers continue to expand, led by the private mortgage insurance industry. And finally, despite an overall halt in home sales, first-time homebuyers continue to heat up the market.

So what does this mean for the current housing cycle? According to Genworth Chief Economist Tian Liu’s analysis, growth in the first-time homebuyer market has represented 85 percent of the growth in single-family home sales. Overall, the impact of the first-time homebuyers has changed the mortgage market.

“In the housing market, the growing presence of first-time homebuyers is beginning to show up in rising homeownership rates among younger households,” Liu explains. “They have a long way to go before getting back to their historical levels and differences among homebuyers matter to understanding the housing market. First-time homebuyers are buying their first home to get more value than just a financial return—that’s why they can outbid other buyers in their price range.”

Liu also notes that unlike repeat buyers, first-time homebuyers don’t have a home to buy and sell at the same time, therefore, the increase in first-time homebuyers is creating challenges in the housing market.

“Their presence is an important reason why housing inventory has been declining, while sales and price growth have been up,” Liu said. “Compounding this challenge is that rising demand from potential first-time homebuyers has not been met by a large increase in affordable new homes.”

As a result of the pullback of repeat homebuyers this quarter, the supply shortage is hurting buyers and limiting the growth of the housing market. In addition, the disconnect between first-time homebuyer demand and supply means that home price gains will continue.

“While many forecasters are predicting a slower pace of home price growth, we see that as an unlikely scenario in 2018,” Liu added. “In fact, our expectation that the conforming loan limit would rise to around $450,000 in 2018 was already fulfilled even before the release of this report.”

To view the full report, click here.

About Author: Nicole Casperson

Nicole Casperson is the Associate Editor of DS News and MReport. She graduated from Texas Tech University where she received her M.A. in Mass Communications and her B.A. in Journalism. Casperson previously worked as a graduate teaching instructor at Texas Tech's College of Media and Communications. To contact Casperson, e-mail: nicole.casperson@thefivestar.com.

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