Analyzing the Housing Market for First-Time, Repeat Buyers

The Q1 2019 Housing Market Indicator report from the AEI Housing Center found that home prices nationally have increased 3.8% year-over-year.

House prices in the “entry-level segment” increased 4.9% in Q1 2019. Repeat buyers saw home prices appreciate by 2.1%. Nationally, home prices have increased 42% overall since 2012. Entry-level home prices have increased 46% since 2012.

The report states that of all home sold during Q1 2019, 57% were in the entry-level segment, and 43% were to repeat buyers. Entry-level buyers paid $194,000 on average for homes, while repeat buyers paid an average of $490,000.

First-time buyers, such as millennials, continue to reshape the mortgage market. According to May’s First-Time Homebuyer Market Report from Genworth Mortgage Insurance, first-time buyers made up 38% of single-family homebuyers and 57% of new purchase borrowers.

“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.”

The AEI Housing Center states that the home supply nationally during Q1 2019 was 3.9%—2.6% for entry-level buyers and 6.1% from repeat buyers.

The mortgage risk nationally was reported to be 12.1%, with entry-level buyers being more at risk at 15.7%. Repeat buyers had a mortgage risk of 8.5%. The mortgage risk remain unchanged from Q4 2018. 

“Higher levels of mortgage risk for entry-level buyers during seller’s markets tend to exacerbate the upward pressure on house prices in this segment,” the report stated.

New construction added 2.1% to the nation’s housing stick between Q1 2013 and Q1 2019. Additions to housing stock during this period varied, while 1% was added to the entry-level segment, and 3.8% to the repeat buyers market.

New construction sales accounted for 10.5% of all sales in Q1 2019.