Photo: Robert Clark
The number of first-time homebuyers in the US reached its highest levels in over a decade in 2017.
Large numbers of first-time buyers were able to secure lower downpayment mortgages to buy their home, despite the limited selection of homes for sale in the entry-level submarket, according to the First-Time Homebuyer Market Report released yesterday by the mortgage brokerage company Genworth Mortgage Insurance (GMI).
Over the last year, the number of homes — including new and existing — purchased by first-time buyers rose 7 percent to 2,070,000. The strongest showing by first-time buyers since 2006.
First-time buyers made up 39 percent of all buyers in the fourth quarter of 2017, and accounted for 55 percent of all purchase mortgages financed.
“The Housing Crisis has left around three million first-time homebuyers on the sidelines, and now these buyers are beginning to return to the market,” GMI Chief Economist Tian Liu tells BuzzBuzzNews.
Some 505,000 single-family homes were purchased by first-time buyers in the fourth quarter of 2017, the best fourth quarter total since 2006. This was up from the 485,000 recorded sales by first-time buyers in the fourth quarter of 2016.
Low downpayment mortgages were used to finance 398,000 of all home sales to first-time buyers in the fourth quarter — the most recorded since 2000, according to GMI.
“When considering that there are still 2,700,000 first-time homebuyers sitting on the sidelines, we believe volume for low down payment mortgages will remain on its upward trajectory,” says Liu.
The first-time homebuyer segment of the market is expected to continue to grow in 2018.
“Since 2014, the segment has accounted for 82 percent of home purchases, but is still facing many headwinds,” says Liu.
Chief among those headwinds is the availability of entry-level inventory. Most new homes built today are priced above the entry-level price point of $250,000 and below. Supply in this segment of the market is seriously lagging behind demand.
“This supply shortage at the lower end of the price curve is driving home prices higher, which is sidelining many first-time homebuyers,” says Liu.
The number of new homes priced under $250,000 fell by 2 percent year-over-year in 2017. At the same time, sales of homes at the entry-level price point fell 2 percent annually, compared to a 25 percent increase in sales in homes priced above $500,000.
Looking ahead, GMI predicts 2018 could be another good year for first-time homebuyers. National job growth and rising income levels should create more homebuyers this year and “drive even stronger demand from first-time buyers.”
Home prices are expected to rise “at their current pace” due to strong demand from first-time buyers and lagging supply increases, a view GMI says is “contrary to many industry forecasts.” Although, since the passage of the Tax Cuts and Jobs Act, some real estate experts have revised their previous forecasts to reflect more conservative home price appreciation.
But the rising home prices will likely leave first-time buyers with both higher debt loads and larger mortgage payments, notes GMI in the report.
Click here to read the entire release.