4Q'18 housing market slowdown intensified outside of first-time homebuyer market; First-time homebuyers remained resilient and outperformed broader housing market
RICHMOND, Va., Feb. 28, 2019 /PRNewswire/ -- Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. (GNW), today released the eighth edition of the First-Time Homebuyer Market Report from its Chief Economist, Tian Liu, detailing data findings from the fourth quarter of 2018 and the full year. The report aggregates all publicly available government data and proprietary mortgage industry data into one dataset. The below highlights are followed by Liu's analysis, and the full report can be downloaded here.
- Fewer first-time homebuyers amid housing slowdown: 480,000 single-family homes were purchased—a decline of three percent from a year ago, compared to a one percent increase in Q3; The first-time homebuyer market was more resilient during the housing slowdown compared to repeat buyers, which saw a decline of seven percent
- Larger Share: First-time homebuyers accounted for 39 percent of single-family homes sold in 2018, up from 31 percent in 2014; 56 percent of new purchase loans in 2018, up from 52 percent in 2014; Highest level of first-time homebuyer mix in the housing market since 2000
- Diverging Trends Across States Continue: The slowdown in Q4 is reflected by a large increase of states reporting lower numbers of homebuyers: 19 states in Q3 compared to 35 in Q4
- Affordability Continued to Deteriorate: Housing affordability deteriorated by 17 percent in Q4 from a year ago, due to rising interest rates and higher home values
- Slowdown Intensified: Homebuyers have reacted to the worsening affordability by putting off buying and looking for lower-priced homes, which resulted in lower prices for first-time homebuyers in Q4. This point is illustrated by lower prices paid by about 80 percent of all homebuyers and 70 percent of first-time homebuyers compared to a year ago. The median price paid by first-time homebuyers declined by two percent year-over-year to $233,600.
Full Year '18 Overview
- Historically Strong First-Time Homebuyer Market: 2.07 million first-time homebuyers purchased single-family homes in 2018, up less than one percent from 2017, and the most since 2006
- A First-Time Homebuyer Cycle: First-time homebuyers accounted for 99 percent of the growth in home sales between 2014 and 2018. They are reshaping the demographics by moving from states such as California, Illinois, Massachusetts, Michigan, Louisiana, New York and Texas, and into states such as Arizona, Florida, Georgia, Delaware, Idaho and Nevada
- Low Down Payment Mortgages Still Preferred: Financed 1.67 million (or 80 percent) first-time homebuyers in 2018, an increase of 50 percent since 2014
- Private Mortgage Insurance (PMI) Most-Sold Product: 682,000 homebuyers used conventional mortgages with PMI to finance their first home purchase in 2018, 53,000 more than the FHA, historically the largest first-time homebuyer product; PMI industry now serves twice as many first-time homebuyers compared to 2014
Comments from Tian Liu, Chief Economist, Genworth Mortgage Insurance
"The first-time homebuyer market once again outperformed the broader housing market, recording its best purchase year since 2006 and regaining its pre-Housing Crisis level. At the same time, first-time homebuyers are not immune to declining affordability, as their number declined nationally and in 35 states in Q4. First-time homebuyers responded to declining affordability by taking a wait-and-see approach and opportunistically looking for lower-priced properties.
Low down payment mortgages -- and conventional loans with private mortgage insurance, in particular, play a very important role in supporting first-time homebuyers, and even more so in a market with declining affordability. The private mortgage insurance industry now serves twice as many first-time homebuyers compared to 2014.
Looking ahead, some first-time homebuyers may be in fear of overpaying during the slowdown which could prolong the slowdown. However, the improved housing affordability in the past two months, if sustained, may boost momentum by the 2019 spring selling season, which could, in turn, lead to better housing data and lift confidence in the market. In the longer term, the current slowdown should serve to remind the housing industry and policymakers of the importance of housing affordability. The housing industry should also take note of the resilience of the first-time homebuyer market in the downturn and offer more products and services to meet their needs."
About Genworth Economist's First-Time Homebuyer Market Report
The First-Time Homebuyer Market Report is the only economic series measuring the number of home sales and mortgages to first-time homebuyers covering the entire housing market. This report provides quarterly estimates of the first-time homebuyer market since the first quarter of 1994—spanning two housing cycles and 24 years. It provides a historical perspective necessary to understand today's first-time homebuyer market. It is based on a sample size of 23.7 million first-time homebuyers from government reports and industry data. By capturing the entire market over a long period, and providing the latest market snapshot, this report makes the first-time homebuyer market more visible to housing industry participants and policymakers.
To access the full report, visit: https://miblog.genworth.com/first-time-homebuyer-market-report-02-19/.
About Genworth Financial
Genworth Financial, Inc. (GNW) is a Fortune 500 insurance holding company committed to helping families achieve the dream of homeownership and address the financial challenges of aging through its leadership positions in mortgage insurance and long term care insurance. Headquartered in Richmond, Virginia, Genworth traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com.
From time to time, Genworth releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the "Investors" section of genworth.com. From time to time, Genworth's publicly traded subsidiaries, Genworth MI Canada Inc. and Genworth Mortgage Insurance Australia Limited, separately release financial and other information about their operations. This information can be found at http://genworth.ca and http://www.genworth.com.au.
Opinions, analyses, estimates, forecasts, and other views included in these materials are those of Tian Liu, are based on current market conditions and are subject to change without notice, do not necessarily represent the views of Genworth or its management, and should not be construed as indicating Genworth's business prospects or expected results. Neither Tian Liu nor Genworth guarantees that the information provided in these materials is accurate, current, or suitable for any particular purpose. Forward looking statements should not be considered as guarantees or predictions of future events.
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