An estimated 3 million new homebuyers over the past decade have been shunned from the market and it could be hindering a housing market recovery, according to a new study by Genworth Mortgage Insurance that will be released Thursday.
Factors deterring young people from venturing into buying their first home include shortages in affordable housing, tighter lending standards, looming student loans, and higher rent prices, according to a report in the Wall Street Journal. Genworth performed the study by analyzing mortgage data from Fannie Mae, Freddie Mac, the Federal Housing Administration, and Veterans Affairs among other sources.
“As we’re seeing millennials age into homeownership, there’s a huge tailwind coming,” Nela Richardson, chief economist at Redfin, told the Journal.
The market averaged about 1.5 million new homebuyers per year over the past decade, a startling difference from the 1.8 million potential annually when population growth is taken into account.
According to the Census Bureau, building companies had started scaling down homes to meet the growing demand for affordable houses among first-time buyers. For the first time since 2009, median home size shrank to 2,422 square feet.
However, 2016 and 2017 data suggests that more first-time homebuyers are emerging. Last year, 2 million first-time buyers purchased homes, representing 37 percent of the market, and in 2017, they represented 38 percent of the market.
“We’ve had a very strong surge in first-time home buyers,” Genworth chief economist Tian Liu told the Journal.
Genworth calculated historical average of first-time homebuyers to be around 35 percent using data dating back to 1994. Of the first-time homebuyers, 78 percent are using low down payment loans to purchase their first dwelling.
Many of the first-time homebuyers in the study were entering their 30’s and meeting their own demands for more space for their families and young children. [WSJ] — Grace Guarnieri