First-time buyers stepped up in Q3, as the U.S. housing market slowed down enough to loosen inventory nationwide, according to the newest First-Time Homebuyer Market Report from Genworth Mortgage Insurance.
As houses got pricier and interest rates went up, affordability suffered, pulling the market's foot off the gas pedal a bit in the third quarter. Perhaps counterintuitively, the report found, this opened the market up to more buyers, including first-timers.
Genworth's Chief Economist, Tian Liu, called this “the biggest surprise” in the report—that during a moderate slowdown, the number of first-time homebuyers increased 17 percent from a year ago.
But it happened, he said, because, with prices so high, first-time buyers are increasingly looking for lower-cost housing, and finding it in an increasing number of states across the South and Southwest.
According to the report, the number of first-time homebuyers grew mainly in Florida, Georgia, Arizona, Mississippi, Virginia, and North Carolina. Those states saw first-time buyer numbers tick up between 5 and 14 percent.
Low downpayment conventional loans with private mortgage insurance were the largest source of credit for first-time homebuyers this quarter, the report found.
Traditionally expensive states like California, New Jersey, New York, Massachusetts, and Illinois were among 19 states to see first-time buyer numbers drop. Dips also occurred in states that have been more friendly to new buyers, mainly Texas, Michigan, and Indiana.
The biggest loss in the number of first-time buyers was in Alaska, down 16 percent. The biggest jump in first-timers, though occurred in South Dakota, where new buyers increased 24 percent in Q3.
Genworth reported that since the second half of 2017, the year-over-year growth in home sales to first-time homebuyers has slowed to less than 3 percent—which happens to be the rate of wage increase growth nationally.
"This is not enough to offset the deterioration in housing costs," Liu said.
Still, the first-time buyer is a strong cog in the system. Younger buyers, in particular—many who've waited for the better part of a decade to start looking—are optimistic that they can find places to live in a strong housing market. They're just shifting their attention from the coasts and towards parts of the country with more affordable options to offer.