While repeat buyers seem less motivated and more likely to be swayed by short-term economic trends, first-time homebuyers are more determined and have been a key driver in the housing market over the past four year.
Despite a gradual slowing of sales, tepid home construction and mounting affordability concerns, first-time buyers outperformed repeat buyers.
That’s the finding of a report issued Monday by Genworth Mortgage Insurance.
“The first-time homebuyer market has been more resilient during the housing sales slowdown compared to repeat buyers,” said Tian Liu, Genworth’s chief economist. “This is a reminder that first-time homebuyers differ from other buyer groups in terms of why they buy.”
Liu noted that first-time buyers are more likely driven by the fact that many are starting families and reaching peak homebuying ages.
“Even when they face common challenges, such as falling affordability, first-time homebuyers and repeat buyers may respond differently,” Liu said.
First-time buyers accounted for 56 percent of mortgage borrowers nationally in the fourth quarter of 2018.
They made 2.07 million home purchases in 2018 — higher than their level prior to the Great Recession of the past decade.
“There remain a large number of ‘missing’ first-time buyers who have yet to return to the market in the wake of the housing crisis,” Liu said. “And many young people are reaching their peak homebuying ages now, leaving them poised to buy over the coming years.”
Homebuyers are still increasingly concerned about affordability and rising home prices, so much so that the flow of people among the 50 states remains fluid as prospective buyers hunt for more affordable housing options. Growth in the first-time homebuyer market remained healthy in Florida, South Dakota, West Virginia, Vermont, Wisconsin, New Mexico and Nevada.
State-level trends
When looking at state-level trends, year-over-year, declines in the first-time homebuyer market have spread from 19 states in third-quarter 2018 to 35 states in the fourth quarter.
States known for less affordable housing — including California, Washington, D.C., New Jersey and New York — reported lower first-time homebuyer numbers in the fourth quarter and all of 2018.
Yet even in high-priced California the hunt for housing is likely to intensify, especially as local inventories swell and sellers become more likely to reduce prices in the face of a shrinking pool of buyers at each price point who can afford to buy.
Indeed, Liu believes with the breadth and depth of home price changes, state-level sales to first-time buyers will inform potential buyers of a turnaround in the housing market and boost buyer confidence.
The wave of first-time homebuyers over the past four years has already created large opportunities in the housing market,” Liu said.
“In 2018, the surge in the number of first-time homebuyers elevated the market share of low down payment mortgages and helped conventional loans with mortgage insurance become the largest source of credit for first-time homebuyers,” he said.
First-time homebuyers have also played a key role in reshaping the demographics of many states with a significant shift in homeowner populations out of states such as California, Illinois, Massachusetts, Michigan, Louisiana, New York and Texas and into states such as Arizona Florida, Georgia, Delaware, Idaho and Nevada.
No doubt, demand for housing will yield dramatic shifts in demographics.
Amanda Etcheverry is the 2019 chair of the Santa Clarita Valley Division of the 10,300-member Southland Regional Association of Realtors.
David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from a Realtor or other realty related professionals.
