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Genworth Mortgage Insurance's chief economist, Tian Liu, released the First-Time Homebuyer Market Report for Q3. Liu reported that Q3's first-time homebuyer purchase market was the largest it has been in 20 years.
"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 Liu, according to a press release.
The report revealed that 700,000 single-family homes were purchased by first-time homebuyers. This marks a 15.7% increase year-over-year. The number of first-time homebuyers jumped 16.3% from Q2 to Q3, which was the fastest pace on record, according to the report.
"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," said Liu. "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."
First-time homebuyers are remaining dependent on low down payment mortgages. In fact, the report points out that 577,000 first-home homebuyers used some form of low down payment mortgage products to finance their homes in Q3. That's more than 80% of all first-time homebuyers.
"The housing finance system continued to perform well during the third quarter to ensure access to credit for first-time homebuyers," said Liu. "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."
Click here to read more from the report.