Private mortgage insurance was the largest source of credit enhancement for new homeowners in the second quarter making a low down payment for the first time ever, according to Genworth Mortgage Insurance.
"First-time homebuyers have a wide range of low down payment mortgage products today to help them become homeowners, accounting for 79% of all home purchase transactions," said Tian Liu, chief economist at Genworth, in a press release. "Over the past few years, conventional loans with mortgage insurance have become increasingly popular. This quarter, for the first time ever, it became the largest source of credit to first-time homebuyers."
While the Federal Housing Administration held the largest share of mortgage insurance-in-force at the end of the second quarter, the gap between the government agency and the collective share held by private mortgage insurers keeps
About 189,000 conventional mortgages with private mortgage insurance were originated to first-time homebuyers during the three months ended June 30, marking the first time the sales of this product outpaced other low down payment options during a quarter, according to Genworth Mortgage Insurance's First-Time Homebuyer Market Report.
First-time homebuyers accounted for 55% of all purchase mortgages originated in the second quarter and for 36% of all single-family homes sold, according to Genworth.
Approximately 454,000 home sales to first-time buyers were financed using low down payment mortgages. This is the highest this figure has been in any second quarter since Genworth began tracking this data.
Though young buyers are battling elevated home prices and mortgage rates, they are the primary drivers of today's housing market. Consumers under 35 experienced the greatest homeownership rate gains of any cohort over the past two years.
"The market needs to put this quarter's slowdown in first-time homebuyer purchase growth in context. Because while quarterly first-time homebuyer purchase growth was nominal, on a semi-annual basis this group recorded the most single-family home purchases since 2005. That is impressive considering overall home sales declined by 2% during the second quarter, with unusually slow activity in June," Liu said.
Higher home prices along with rising interest rates increased the average monthly mortgage payment for a first-time buyer by 12.6% over the previous year. "Despite this, as well as a slowing in new home construction and a decrease in supply at every price point within the 'affordable home range' of $150,000 to $300,000, buyers under 35 years of age increased their homeownership rate, showing a determination and resiliency to become homeowners," Liu said.
