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Nov 27, 2017

First-time Home Sales Expected to Overtake Overall Market Pace in 2018

According to a survey of mortgage industry executives, first-time home buyers are expected to surpass the overall rate of housing sales in 2018. A Genworth Financial survey conducted at the annual convention of the Mortgage Bankers Association in Denver found that 57% of respondents expected the first-time home buyer's market to grow faster than the overall market. By comparison, 31% expected the rates to be roughly equal, while 12% predicted a slower first-time buyer's market.

 Tools to Buoy Cautious Optimism

Despite the optimistic outlook, many of those surveyed expressed concerns about the challenges facing first-time home buyers. "First-time home buyers still face many headwinds," said Rohit Gupta, President and CEO of Genworth Mortgage Insurance. Forty-six percent of those surveyed cited insufficient savings for a down payment as the primary obstacle for first-time home buyers. A lack of affordable housing inventory came in second, with 35% of respondents concerned over that potential roadblock.

Gupta stressed that alternative mortgage products could be an effective way to mitigate problems caused by insufficient down payment savings. "Ensuring that the right tools from both a product and educational standpoint are in place is imperative to supporting the continued positive trajectory for these buyers," he said in a press release, in reference to low down-payment mortgage solutions.

Student debt and slow income growth are among the factors making it difficult for first-time home shoppers to be able to afford down payments. The government offers several programs designed to help first-time home buyers who may be unable to afford a typical 20% down payment, including Federal Housing Administration loans, U.S. Department of Agriculture loans, and Veterans Affairs loans. There are also special loans backed by Fannie Mae and Freddie Mac, and sweat equity programs offered by non-profit organizations. Mortgage lenders may also offer their own low-down payment loan options.

Recent years have seen rapid growth among home buyers utilizing low down-payment mortgage options, which has helped drive first-time home buying rates upward. However, such purchasers carry heavier levels of mortgage debt relative to buyers who opt for more traditional mortgage loan structures.

Opportunities For & Among First-Time Home Buyers

Housing inventory may be a less tractable problem, but there are cities in the United States where the available housing inventory remains high relative to the total number of houses, such as Orlando, Florida and Atlanta, Georgia.

There are other indicators that first-time home buyers are on the rise. Google searches related to buying a home for the first time have recently been on an uptick. More concretely, a Genworth Mortgage Insurance report revealed that the second quarter of 2017 saw 570,000 first-time home sales, an increase from the 426,000 sold in the first quarter, and the highest number of second quarter first-time home purchases since 1999.

While these are positive signs, home ownership rates remain at historic lows for the youngest generation of home buyers. With the current rate of first-time home purchases, a little extra attention to this potential market from home builders and mortgage lenders could result in continued and sustained growth in 2018.

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