First-time home buyers are firmly back in the market, as many have realized that buying is about securing a home rather than acquiring a marketable asset, says economist Tony Alexander.
Their latest survey of mortgage advisors showed a net positive of 48% reporting more inquiries from first-time homebuyers this month.
A score of zero would indicate that respondents were evenly split on whether more or fewer buyers were seeking advice.
The 48% net positive was the same as last month.which was the highest since the first survey in June 2020.
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It was also the third month in a row that more advisers reported an increase in the number of first-time homebuyers seeking help, rather than a decrease in the number.
August’s result of a net positive of 8% was the strongest since February 2021and a change from December when a net negative 75%, advisors reported seeing fewer first-time buyers.
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Lower home prices, more listings, and greater availability of credit are alluring to first-time homebuyers.
Alexander said that while there was an observable return of first-time buyers, their re-entry was not becoming a widespread move by most first-time buyers.
But the result was strong confirmation that first-time buyers who wanted to take advantage of a market that was in their favor were coming back, he said.
“On the contrary, the survey shows that investors are still cautious and holding back, so it is first-time buyers who account for the improved open house and auction numbers being reported.”
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Investors needing mortgages to buy property fell to a 20-year low in September, says CoreLogic head of research Nick Goodall.
The fall in house prices throughout this year was one of the reasons for the change, but there were other reasons, he said.
“Credit availability has improved since the beginning of this year, and in this survey more advisers reported a better willingness by banks to advance funds for the fourth month in a row. So there is better access to financing, although it is no longer what it was before”.
Another reason was that more first-time homebuyers realized a home was a place to put down roots and raise a family, rather than a tradable asset, he said.
That had led them to stop trying to grab the bottom of the market and start looking for a place to call home.
There were also twice as many listings as last year, so there were a lot more options for them and they had jobs, unlike previous periods of market weakness, Alexander said.
“Although the demand from first-time homebuyers was always there, they backed off and waited for a while, but that has changed and their renewed presence in the market is likely to continue.”
The latest CoreLogic buyer ranking figures also showed an increase in first-time homebuyers. Its market share was 24% in September, compared to 21% in March.
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First-time homebuyers had a 24% share of purchases in September, says CoreLogic.
It was not at the level recorded in the third quarter of last year, when first-time homebuyers accounted for a record 26.5% market sharesaid Kelvin Davidson, chief property economist at CoreLogic.
“But it is above the historical average of around 21%, and it is well above market share of mortgaged investors which is 20%.”
It’s worth noting that the number of property sales was generally quite low, but first-time homebuyers seemed to be holding up better than other groups of buyers, he said.
“However, their share of buyers has not only increased by default. There’s a pretty consistent feeling that first-time buyers have started to come back and are definitely more active.”
Mortgages Online director Hamish Patel said there has been an increase in inquiries from first-time homebuyers recently and business is now busy after a few quiet months.
There was quite a bit of demand pressure building up from people waiting to see what would happen, but first-time homebuyers didn’t tend to wait too long, he said.
“The changes to maximum limits on grants and loans for first homesCoupled with lower home prices, they help more people get into the market, which is why we’re seeing more first-time homebuyers.”
They currently had less competition from other groups of buyers who were still waiting to see what would happen with the market, though how long that would last remained to be seen, he said.
