RICHMOND, Va.– The COVID-19 pandemic-induced economic slowdown has triggered a sharp slowdown in first-time homebuyer activity, according to a new report.
The First-Time Homebuyer Market Report issued by Genworth Mortgage Insurance, authored by its chief economist, Tian Liu, examined second quarter 2020 data and aggregated all publicly available government data and proprietary mortgage industry data into one digestible report.
The Findings
According to the report:
- First-time homebuyer activity decreased largely due to economic shutdown, but remained the most active segment
- During the second quarter, 539,000 single-family homes were purchased by first-time homebuyers, down 4.6% from a year ago
- The number of first-time homebuyers decreased by 18% from the previous quarter to a seasonally adjusted annual rate of 1.86 million in Q2, the slowest pace since 2016
- First-time homebuyers represented 40% of single-family home sale and 57% of all purchase mortgages
- Slower pace in first-time homebuyer activity still yielded just over 1 million Americans becoming first-time homebuyers in the first half of 2020, which was 4% higher than a year ago
- First-time homebuyers out-performed repeat buyers in Q2; repeat buyer market decreased by 19% from a year ago to 793,000 units
- Lower rates helped to ease housing affordability, as mortgage rates for first-time homebuyers fell to 3.36% in June, the lowest point since 2012, reducing the monthly principal and interest cost by 2% from Q1
Additional Findings
The report found first-time homebuyers more dependent on low down payment mortgages during the pandemic. Among the related findings:
- Overall, 449,000 first-time homebuyers used some form of low down payment mortgage products to finance their home purchase in Q2, or a record 83% of all first-time homebuyers
- Low down payment conventional mortgages, enabled by the private mortgage insurance industry, helped 207,000 first-time homebuyers in Q2; PMI financed 38% of first-time homebuyers, up from 30% in the first quarter, and a new record for the industry
- The FHA market financed 30% of first-time homebuyers, down from 35% in the first quarter
State & Regional Performance
According to the report, the overall housing market staged a strong recovery in May and June that exceeded all expectations.
- Nationally, the number of rate locks by first-time homebuyers increased by 55% between April and June. No states reported negative growth during this period, Genworth Mortgage Insurance said.
- New York, Pennsylvania, New Jersey and Michigan saw recoveries in first-time homebuyer rate locks of more than 100% between April and June
- A total of 35 states and Puerto Rico reported fewer first-time homebuyers compared to the same period a year ago, but 15 states and the District of Columbia reported more first-time homebuyers
“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March. The housing market also began correcting in April, resulting in an 18% decrease in the number of first-time homebuyers in the second quarter compared to the first quarter. A quick rebound in May moderated the market decline,” said Liu.
The full report can be found here.