The housing market tested the resiliency of first-time homebuyers in 2018, according to Genworth's First-Time Homebuyer Report for Q4 2018 released on Thursday. The report indicated that Q4 saw larger declines in home sales even as housing supply increased. It saw lower growth in new single-family home construction as well as a decelerating home price growth.
Despite these headwinds, the report indicated that the first-time homebuyer market continued to outperform broader market indicators, with 482,000 buyers purchasing their first home in Q4.
Compared to a year ago though, these numbers registered a 3 percent decline—its first since 2014, with the repeat buyer market registering an even larger 7 percent decline during the quarter.
"This is a reminder that first-time homebuyers differ from other buyer groups in terms of why they buy–their purchase decisions are more likely driven by the fact that many are starting families and reaching peak homebuying ages," said Tian Liu, Chief Economist at Genworth.
Giving an example of how this demographic was becoming increasingly important for Realtors, lenders, and homebuilders, Liu said that the mortgage insurance industry saw an 8 percent growth in the number of first-time buyers in Q4 and a record 682,000 first-time homebuyers in 2018.
Looking at the larger housing market indicators, the report noted that all trends pointed to a slowing housing market in Q4 with the sales of single-family homes recording the biggest year-over-year decline in nearly five years and inventory increasing by a large margin even as home prices and interest rates grew. While some first-time buyers adjusted to these changes by putting off their decision to buy, others decided to look for lower-priced homes, putting an added strain on the affordability for homes in the entry-tier segment of the market.
Region-wise, the report indicated Florida, South Dakota, West Virginia, Vermont, Wisconsin, New Mexico, and Nevada remained healthy markets for first-time buyers.
Looking at 2019, the report said even though home sales did not benefit from lower prices and mortgage rates at the end of Q4, these factors would make housing more affordable in Q1 of 2019 making the environment more positive for housing.
With the breadth and depth of home price changes, state-level sales to first-time homebuyer activities will inform potential buyers of a turnaround in the housing market and boost buyer confidence, the report noted.