Genworth Mortgage Insurance's Economist Report, Second Quarter: Sharp Slowdown in First-Time Homebuyer Market; COVID-19 Pandemic Impact on Housing Market

Rhea-AI Summary

Genworth Mortgage Insurance reported a decline in first-time homebuyer activity for Q2 2020, with 539,000 homes purchased, down 4.6% year-over-year. The annualized rate for first-time buyers fell to 1.86 million, the lowest since 2016. Despite this, first-time buyers constituted 40% of single-family sales. Mortgage rates dropped to 3.36%, aiding affordability. Moreover, a record 83% of first-time buyers utilized low-down payment mortgages. A recovery was noted in May and June, evidenced by a 55% increase in rate locks, although some states reported fewer buyers compared to last year.

Positive

• First-time homebuyers represented 40% of single-family home sales.
• Mortgage rates fell to 3.36%, reducing monthly costs by 2%.
• 83% of first-time homebuyers used low-down payment mortgages, a record high.

Negative

• First-time homebuyer activity decreased by 18% from the previous quarter.
• The number of homes purchased by first-time buyers fell to 539,000, a 4.6% decline from last year.
• First-time homebuyer market at a seasonally adjusted annual rate of 1.86 million, the slowest since 2016.

RICHMOND, Va., Sept. 15, 2020 /PRNewswire/ -- Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. (NYSE: GNW), today released the 13^th edition of the First-Time Homebuyer Market Report, authored by its Chief Economist, Tian Liu, for the second 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 decreased largely due to economic shutdown, but remained the most active segment:
• 2Q'20: 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 percent 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 percent of single-family home sale and 57 percent 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 four percent higher than a year ago
• First-time homebuyers out-performed repeat buyers in Q2; repeat buyer market decreased by 19 percent from a year ago to 793,000 units

• Lower rates helped to ease housing affordability:
• 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 two percent from Q1

• First-time homebuyers more dependent on low-down payment mortgages during the pandemic:
• 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 percent of all first-time homebuyers
• PMI: Low-down payment conventional mortgages, enabled by the private mortgage insurance industry, helped 207,000 first-time homebuyers in Q2; PMI financed 38 percent of first-time homebuyers, up from 30 percent in the first quarter, and a new record for the industry
• FHA: The FHA market financed 30 percent of first-time homebuyers, down from 35 percent in the first quarter

• State-by-State COVID-19 Impact:
• 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 percent between April and June; No states reported negative growth during this period
• New York, Pennsylvania, New Jersey and Michigan saw recoveries in first-time homebuyer rate locks of over 100 percent 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 percent 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 Tian Liu, Chief Economist, Genworth Mortgage Insurance.

"Overall, the housing finance system was able to maintain credit availability for first-time homebuyers during the COVID-19 pandemic given the enormous challenges. The percentage of home sales to first-time homebuyers did not decrease from its pre-COVID-19 levels, and the percentage of first-time homebuyers using low-down payment mortgages increased to 83 percent, which is higher than the historical average. The private mortgage insurance industry played a significant role in maintaining credit availability, financing over 200,000 first-time homebuyers, or almost four out of every ten first-time homebuyers. Credit availability did contract more noticeably for FHA loans and conventional loans not backed by Fannie Mae and Freddie Mac. This may have had a bigger impact on borrowers with weaker credit histories. The main reasons that the housing finance system has largely maintained credit availability to date include a focus on prudent underwriting, having adequate capital in the financial system, a significant presence for the agency market that will take credit risk during periods of market stress, and continued investment in technology to make the industry capacity more elastic."

"The stronger rebound in repeat buyers suggests that homeowners may be reassessing their housing needs to take into account the likelihood of a continued work from home arrangement, online education for children, and more attractive home prices. Growth slowed among both first-time homebuyers and repeat buyers in July, resulting in a seven percent decline in the number of first-time homebuyers and a seven percent increase in the number of repeat buyers between June and July. The initial strong growth may have benefited from more affordable home prices, as housing demand recovered, and average loan sizes. By implication, home prices also have rebounded so the overall affordability has become less favorable compared to earlier in the year."   

About Genworth'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 23.2 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 is the current state of the first-time homebuyer market according to GNW's latest report?

As of Q2 2020, first-time homebuyers purchased 539,000 homes, marking a 4.6% decrease year-over-year.

How has COVID-19 impacted first-time homebuyer activity as reported by GNW?

First-time homebuyer activity saw an 18% drop from Q1 2020, the slowest pace since 2016.

What percentage of first-time homebuyers used low-down payment mortgages as per GNW's report?

83% of first-time homebuyers utilized low-down payment mortgage products, a record high.

Did mortgage rates increase or decrease in June 2020 according to GNW?

Mortgage rates decreased to 3.36% in June 2020, the lowest since 2012.

What trends were observed in rate locks for first-time homebuyers between April and June 2020?

There was a 55% increase in rate locks for first-time homebuyers during this period.