First time buyers make up 38 percent of single-family homebuyers and 57 percent of new purchase borrowers, according to the latest First-Time Homebuyer Market Report from Genworth Mortgage Insurance.
“First-time homebuyers are typically different from other homebuyers, having less income and savings, but also are more likely to buy because they are starting a family versus changing jobs, retiring, or upgrading their home,” said Genworth Chief Economist Tian Liu. “For these reasons, the first-time homebuyer market and the rest of the housing market do not necessarily move together. Since 2014, home sales to first-time homebuyers have accounted for most of the growth while sales to repeat buyers have been largely flat.”
Genworth notes that since 2014, first-time buyers have been the biggest contributors to home sales growth, while sales to repeat buyers has remained relatively flat. According to the study, the steady surge in first time homebuyers is due to both cyclical and demographic forces.
“The cyclical force is the unwinding of the Housing Crisis, which resulted in over three million potential first-time homebuyers delaying home purchase,” Liu said. “Many of these delayed buyers are coming back into the market. This trend is reflected in the rising homeownership rate over the past few years for households headed by people under 45, which has increased from 58 percent in Q1 2015 to 60 percent this quarter.”
The demographic force, on the other hand, is the maturing millennials. Liu notes that like the generations before, the millennials’ propensity to buy and own a home naturally increases as they come of age. The sharp increase in homeownership rate means that many millennials have been buying in the past few years, and more will come.
Young millennials are still reaching homebuying age. Genworth notes that the average homeownership rate increases from 35 percent to 60 percent as the head of household age goes from under-35 to between 35 and 44. However, while this propensity will continue to rise later in life, the increase will be less dramatic.