More first-time buyers emerged on the market in the third quarter—a modest rise, but one that economists are still upbeat about.
First-time buyers purchased 591,000 homes in the third quarter, a year-over-year increase of 1%, Genworth Mortgage Insurance reports. First-time buyers comprised 39% of all buyers in the single-family market, and 55% of purchase mortgages.
A large number of millennials are beginning to reach their early 30s. The average homeownership rate is 15 percentage points higher for those aged 30–34 compared to those aged 25–29, U.S. Census Bureau data shows.
“The sharp increase in the homeownership rate from late 20s to early 30s implies that millennials are in the middle of their transition from renting to owning, which explains the higher mix of first-time homebuyers in the housing market,” the Genworth report notes. “Millennials currently span the ages of 23 and 38, so their transition is only around halfway complete.”
Thirty-two states saw an uptick in first-time buyers in the third quarter. Florida saw the fastest year-over-year growth at 6% in the third quarter, followed by Texas at 3%. Other states seeing large growth in their first-time homebuyer market included California, Arizona, Georgia, New Jersey, Washington, and Illinois.
“Lower interest rates and slower growth in home prices have helped improve housing affordability and drive the rebound in the first-time homebuyer market,” the report notes. The 30-year fixed-rate mortgage averaged 3.66% in the third quarter for the entire market; the interest rate for first-time buyers was 4.11%–the lowest level since the fourth quarter of 2016.
Low down payment mortgages are a major source for first-time home buyers. Eighty-eight percent of purchase loans in 2018 went to first-time buyers with a 3%-5% down payment, according to the Genworth report.