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Q3 Presents Ideal Buying Conditions for First-Time Homeowners

keys, home. doorFirst-time homebuyers were responsible for a total of 700,000 single-family home purchases during the third quarter of this year, according to new data from Genworth Mortgage Insurance. This marked a 15.7% increase from a year ago, and it also represented the greatest number of first-time homebuyers purchasing homes in 20 years and the highest level of home sales since 2006.

“During the pandemic, homes have taken on new roles in people’s lives as many businesses and schools have shifted to remote operations and learning, and many social activities have shifted from locations outside the home to either online, in the backyard or outdoor spaces,” said Tian Liu, Chief Economist at Genworth Mortgage Insurance. “These added functionalities during the pandemic encouraged many Americans to become first-time homebuyers in the quarter, while historically low interest rates have made monthly mortgage payments and homes more affordable for any given level of home price."

Liu continued: “The rising housing demand also came from existing homeowners this quarter resulting in increased repeat buyer activity, as rapid and profound shifts in both work and life changed where people want to live, the kind of homes they want, and how much they want to pay.”

Also helping to fuel interest, Liu added, were mortgage rates, which dropped from 3.36% in June to the record low of 3.01% in September, and credit access to low down payment mortgages. During the third quarter, 577,000 first-time homebuyers, or 82% of the first-time homebuyer market, bought their residences using a low-down-payment mortgage. Low-down payment conventional mortgages backed by private mortgage insurance financed a record 285,000 first-time homebuyers, up 34% year-over-year, while the Federal Housing Administration’s loan programs helped finance 195,000 first-time homebuyers during the quarter, an 8% year-over-year increase.

The number of first-time homebuyers in the third quarter increased by 16.3% from the second quarter to a seasonally-adjusted annual rate of 2.55 million, the fastest pace recorded since the company began tracking this data. The third quarter got off to a speedy start with a record 244,000 first-time buyers in July – an increase by 45,000 from June – and continued in August and September at 233,000 and 223,000.

“Given the strong market condition in the year so far, 2020 will likely have one of the strongest first-time homebuyer markets in history, approaching previous highs of 2.38 million in 1999 and 2.26 million in 2000,” Liu continued. “This comes after three years of strong first-time homebuyer market activity, when the number exceeded 2 million each year.”

However, the third quarter gains were not universal. The new data determined that 47 states and territories reported a higher number of first-time homebuyers, with only Pennsylvania, New York, Michigan, Puerto Rico, and Hawaii had fewer first-time homebuyers compared to one year earlier.

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.
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