Mortgage rates dropped again, and according to Freddie Mac, the downward spiral has first-time buyers gaining ground. In fact, of all the loans Freddie Mac has purchased in 2019, 46% came from first-time homebuyers—a two-decade high for the company.
According to representatives at online mortgage provider Better.com, the lender has seen a “huge uptick” in first-time homebuyers as well. There’s also been a 200% increase in Generation Z homebuyers (born 1997-2012) and a 500% increase in single female homebuyers aged 30-40.
As Sam Khater, Freddie Mac’s chief economist, reported yesterday, “The fifty-year low in the unemployment rate, combined with low mortgage rates, has led to increased homebuyer demand this year. Much of this strength is coming from entry-level buyers.”
But it’s not just first-timers who are getting in on the fun. Decreasing mortgage rates—which hit 3.57% this week—are also causing a surge in refinancing. Data from the Mortgage Bankers Association has refinance applications up 163% since one year ago and 10% over the week.
All in all, refinancing accounted for more than 60% of mortgage activity in the last week alone.
Will the trend continue, though? While mortgage rate forecasts spell prime homebuying conditions for the months to come, inventory shortages may hold first-time buyers back from their full potential. Millennials’ penchant for the more-limited move-in ready properties could also slow down first-time sales.
As Jennifer Darby Metzger, a real estate agent with ERA Justin Realty Co. in Rutherford, New Jersey, explains, “These days I think younger consumers who are considering buying their first home weigh the pros and cons of purchasing a property that requires maintenance and renovations against a living space that is new and modernized, and choose the latter. Millennial buyers tend to want to start off fresh and have someone to call if anything breaks.”
Recent data from Bungalo all but confirms this theory. According to its State of the Starter Home report, three in four Millennials want a completely move-in ready property.