First-time buyers set 11-year record, choose lower down payments

First-time buyers were keen to buy in 2017, buying more single-family homes than in any year since 2006, but supply issues constrained sales

By Steve Randall

23 Feb 2018

First-time buyers were keen to buy in 2017, buying more single-family homes than in any year since 2006, but supply issues constrained sales.

Genworth Mortgage Insurance data shows 2,070,000 single-family purchases in the year, up 7% from 2016 but the growth of purchases slowed to just 6%, half that of 2016 and a third of the 18% growth in 2015.

In the last three months of 2017, 505,000 single-family homes were bought by first-timers (up from 485,000 a year earlier) who accounted for 39% of all single-family homes bought in the quarter, and 55% of all mortgages financed.

"The first-time homebuyer segment had one of its strongest years on record, and we expect it to continue growing in market share and driving the purchase market in 2018. Since 2014, the segment has accounted for 82% of home purchases, but is still facing many headwinds,” said Genworth MI’s chief economist Tian Liu.

Many first-time buyers are being sidelined though as supply of homes in their typical price range of $250K or less is not being served. That is putting upward pressure on prices, added Liu.

First-time buyers drive lower down payment loans

First-time buyers also set a new record for the number of home purchases financed by low down payment mortgages.

There were 398,000 homes sold to first-timers in the fourth quarter of 2017, the largest number in a fourth quarter since 2000.

“This coincided with loans backed by private mortgage insurance having one of their best quarters on record, at 157,000 loans insured,” said Liu. “When considering that there are still 2,700,000 first-time homebuyers sitting on the sidelines, we believe volume for low down payment mortgages and privately insured loans will remain on its upward trajectory.”