A limited housing inventory did not seem to keep first time home buyers out of the market in Q2 2018, according to the First Time Homebuyer Market Report from Genworth Mortgage Insurance. In Q2 2018, the first time homebuyer market share was 572,000, a one percent increase year over year, accounting for 36 percent of total home sales, and the largest number of first time homebuyers for Q2 since 1999.
“While low inventory and higher costs made it challenging for first-time homebuyers, it is remarkable that so many purchased homes in the first half of the year,” said Tian Liu, Chief Economist, Genworth Mortgage Insurance. “In absolute numbers, 985,000 first-time homebuyers bought homes during the first half of 2018, the most since 2005. They continued to be very resilient and made up a large part of housing-related transactions.”
The report notes that inventory still poses as a problem, as inventory has continued to decline, though at a more moderate rate. Additionally, new construction has not yet managed to keep up with demand from first time home buyers.
Still, first time homebuyers are the largest driving force behind the growing number of homebuyers. Thirty-six percent of single-family home sales and 55 percent of new purchase loans went to first-time homebuyers in Q2 2018.
The report notes there were two million more homebuyers year over year in 2017, which means that the 2.1 million first time homebuyers were the reason for the increase. Following a trough two years previously, homeownership rates have been steadily recovering, driven by new buyers, and younger buyers. Homeownership increased by 2.4 points for the under-35 age group and increased by 1.5 points for the 45-54 age group.
Liu analyzed what the influx of new buyers could mean.
“More first-time homebuyers and fewer speculators mean that the housing market today is far more stable,” said Liu. “Finally, between 2014 and 2017, first-time homebuyers accounted for around 80 percent of the growth in home sales, so the run-up in home prices has not been the result of speculative demand.”
Find the full report here.