First-time homebuyers are buying like it's 1999, according to a recent Genworth Financial report, which said 570,000 single-family homes were purchased in the second quarter of 2017. This is compared to Q1 2017's 426,000 homes and the highest number of first-time purchases in a second quarter since Q2 of 1999.
Of all single-family homes sold during Q2 2017, 36 percent were first-time homebuyers, up from 34 percent in Q2 2016. In the mortgage market, 57 percent of all purchases originated came from the group, an increase from 56 percent a year ago. According to the report, historically, first-time homebuyers accounted for 35 percent of the single-family housing market and 45 percent of the purchase mortgage market.
"The rapid growth in the first-time homebuyer market that began in 2015 continued into the second quarter. As the housing market matures, first-time homebuyers are becoming an even more important source of growth," said Tian Liu, Chief Economist for Genworth Mortgage Insurance. "Whether one looks at the 3 million missing first-time homebuyers since 2007 or the historically low homeownership rate among young households, the potential growth opportunity remains large and will likely take years to play out. The current housing cycle will be defined by first-time homebuyers."
According to Liu, homebuilders have begun adjusting their products further down the pricing curve to cater to the fact that first-time homebuyers are outpacing the rest of the single-family housing market. Homebuilders are trying to build more single-family homes between $200,000 and $250,000, which is the most popular price range among first-time homebuyers. However, he said that the growth in supply still isn't matching the demand, leaving many first timers frozen out of the market.
New and affordable starter homes have led to a sharp decline in vacant homes for sale, according to the report. 1990's numbers aren't only reflected in first-time homebuyer purchases, but also homeowner vacancy rates, which are at the lowest levels since 1994. Genworth believes this will spur continued home price appreciation.
"While many forecasters predict that increased supply will stem home price appreciation, we believe a slowdown in home price appreciation will be unlikely in 2017 and 2018," said Liu. "We do not believe that the strong growth in home prices is leading to another housing bubble. A key feature of housing bubbles is speculative demand. Today, first-time homebuyers are out-bidding investors and cash-buyers."
To see the full report, click here.