Genworth Mortgage Insurance's Chief Economist Report, Third Quarter: Largest First-Time Homebuyer Purchase Market in 20 Years

Rhea-AI Summary

Genworth Mortgage Insurance released its Q3 2020 First-Time Homebuyer Market Report, revealing significant increases in homebuyer activity. 700,000 homes were bought by first-time buyers, up 15.7% year-over-year. The number of first-time homebuyers reached a record of 2.55 million on an annualized basis. Low mortgage rates dropped to 3.01%, aiding affordability. 82% of first-time buyers utilized low-down payment mortgages. The repeat buyer market also grew by 17% to 1.08 million homes. Most states saw gains in first-time homebuyer numbers.

Positive

• 700,000 single-family homes purchased by first-time homebuyers in Q3 2020, up 15.7% YoY.
• First-time homebuyers accounted for 39% of single-family home sales and 58% of all purchase mortgages.
• Record number of first-time homebuyers reached 2.55 million at an annual rate, the fastest pace on record.
• Mortgage rates decreased to 3.01%, the lowest on record, improving affordability.
• 82% of first-time buyers used low-down payment mortgage products.
• Repeat buyer market grew by 17% to 1.08 million units.

Negative

• None.

RICHMOND, Va., Dec. 16, 2020 /PRNewswire/ -- Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. (NYSE: GNW), today released the 14^th edition of its Chief Economist's, Tian Liu, First-Time Homebuyer Market Report for the third quarter of 2020. The report aggregates all publicly available government data and proprietary mortgage industry data into one digestible report. The full analysis can be viewed at https://miblog.genworth.com/first-time-homebuyer-market-report/.

Overview

• First-time homebuyer activity increased significantly due to low interest rates, greater affordability, and re-ignited appreciation of "home":
• Q3'20: 700,000 single-family homes were purchased by first-time homebuyers, up 15.7% from a year ago
• The number of first-time homebuyers increased by 16.3% from the second quarter to a seasonally-adjusted annual rate of 2.55 million in Q3, the fastest pace on record
• First-time homebuyers represented 39 percent of single-family home sales and 58 percent of all purchase mortgages
  
• Lower interest rates helped ease housing affordability:
• Mortgage rates for first-time homebuyers decreased from 3.36% in June to 3.01% in September, the lowest interest rate for mortgages on record
• Compared to Q2, lower interest rates reduced mortgage payments by four percent, while higher home prices increased mortgage payments by three percent
  
• First-time homebuyers remain dependent on low-down payment mortgages:
• Overall, 577,000 first-time homebuyers used some form of low-down payment mortgage products to finance their home purchase in Q3, or 82 percent of all first-time homebuyers
• PMI: Low-down payment conventional mortgages, enabled by the PMI industry, helped a record 285,000 first-time homebuyers in Q3, up 34 percent from a year ago
• FHA: The FHA loans program financed 195,000 first-time homebuyers during the quarter, an increase of 8 percent from a year ago 
  
• State-by-State COVID-19 Impact:
• An overwhelming number of states reported a higher number of first-time homebuyers in Q3 compared to a year ago
• Only three states-- New York, Pennsylvania, and Hawaii—reported fewer first-time homebuyers in the quarter compared to a year ago
• For most states, the booming third quarter has erased the sharp declines in the first-time homebuyer market from Q2
• Year-to-date, 47 states and territories reported a higher number of first-time homebuyers
  
• Repeat buyer market also reported strong growth
• Growth in the third quarter increased by 17 percent from a year ago to 1.08 million units
• In the first 9 months, repeat buyers purchased a total of 2.55 million homes, down one percent compared to the same period last year
• Decrease driven by the sharper slowdown in the repeat buyer market during Q2

"The third quarter of 2020 was a remarkable quarter for both the housing market and the first-time homebuyer segment, with the most first-time homebuyers purchasing homes in 20 years, and the highest level of home sales since 2006. Even though the economy is still in the middle of the recession, and a large number of workers remained unemployed or unable to participate in the labor force, there was overwhelming demand for housing and homeownership from those still able to purchase a home," said Tian Liu, Chief Economist, Genworth Mortgage Insurance.

"The pandemic has increased preference for homeownership as homes are serving as shelter, office, and classroom. Lower interest rates have made homes more affordable, while reduced spending on personal services, travel, and leisure has increased the share of expenditure available for housing. A shift in housing preference among existing homeowners is driving repeat buyer activities as they look for different locations and different home features. The housing boom has resulted in higher home prices and sparked an increase in new construction of single-family homes."   

"The housing finance system continued to perform well during the third quarter to ensure access to credit for first-time homebuyers. The COVID-19 pandemic has stressed the housing finance system in three ways: more hurdles to buy and sell homes; tighter credit availability due to increased credit risk – both actual and perceived; and lack of mortgage industry capacity due to rising demand for refinancing. Credit availability for potential first-time homebuyers can be especially vulnerable since first-time homebuyers rely heavily on low-down payment mortgages for financing."

About Genworth Mortgage Insurance's Chief Economist 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 23.2 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.

For access to the full report and charts, visit: https://miblog.genworth.com/first-time-homebuyer-market-report/

About Genworth Mortgage Insurance
Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. (NYSE: GNW), is headquartered in Raleigh, North Carolina, and operates in all 50 states and the District of Columbia. Genworth Mortgage Insurance works with lenders and other partners to help people responsibly achieve and maintain the dream of homeownership by ensuring the broad availability of affordable low down payment mortgage loans. Genworth has been providing mortgage insurance products and services in the U.S. since 1981.

Disclaimer
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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SOURCE Genworth Mortgage Insurance

FAQ

What does the latest Genworth Mortgage Insurance report reveal about first-time homebuyers?

The report indicates that first-time homebuyer activity rose significantly, with 700,000 homes purchased in Q3 2020, marking a 15.7% increase from the previous year.

How did mortgage rates impact first-time homebuyers in Q3 2020?

Mortgage rates fell to 3.01% in Q3 2020, the lowest on record, which enhanced affordability for first-time homebuyers.

What percentage of home sales were made by first-time homebuyers in Q3 2020?

First-time homebuyers represented 39% of single-family home sales in Q3 2020.

How many first-time homebuyers used low-down payment mortgages according to Genworth's report?

In Q3 2020, 82% of first-time homebuyers financed their purchases using low-down payment mortgage products.

What was the growth in the repeat buyer market as reported by Genworth for Q3 2020?

The repeat buyer market grew by 17% in Q3 2020, totaling 1.08 million units.