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In a weak first quarter, housing activity held up better for first-time homebuyers than others, according to a new Genworth Mortgage Insurance report.
Home sales to first-time buyers decreased 3% from a year ago. In comparison, there was a 6% year-over-year decline in existing owners buying a home during the first quarter, and cash sales were down 7%.
Relative strength in the first-time homebuyer market helps the larger housing market, Rohit Gupta, the president and CEO of Genworth’s U.S. mortgage insurance business, noted in an interview.
“When you think about first-time homebuyers, they are creating new demand for the housing market,” he said. “Existing buyers buy a home and give up a home, so net-net, there is incremental change in dollar volume, but the units remain the same, whereas first-time homebuyers are adding to demand.”
For first-time buyers, the average mortgage rate dropped 15 basis points in the first quarter, Genworth found. In comparison, there was 41-basis-point drop in the average rate for the conventional 30-year mortgage overall, according to Freddie Mac data that Genworth analyzed. This suggests first-time homebuyers received less of a benefit from declining rates during the period than other groups.
Nearly 80% of all first-time buyers obtained some form of low down payment mortgage during the first quarter, according to the report.
Conventional mortgages with high loan-to-value ratios, which typically have private mortgage insurance coverage, were used by 133,000 first-time buyers in the quarter, up 5% from the previous year.
In comparison, the Federal Housing Administration’s mortgage insurance program was used by 127,000 buyers.
Conforming mortgages with lower loan-to-value ratios were used by 55,000 buyers. Loans guaranteed by the Department of Veterans Affairs were used by 36,000 buyers.
The first quarter was a slight pullback, as first-time homebuyers purchased more homes last year than they had since the crisis.