DR Horton Inc’s quarterly results gave a strong indication that first-time home buyers are finally returning to the market as home ownership in the United States becomes cheaper than renting.

This will come at a cost to the largest US home builder’s profit margins in the short term, as its low-priced homes account for a much greater proportion of sales.

Longer term, higher demand from Americans in the 25 to 33 age group will be significant for the housing market, indicating underlying strength and the promise of a more steady recovery seven years after the global financial crisis struck.

DR Horton said sales to this demographic tripled in the quarter ended March 31, helped by more relaxed mortgage rules and rising confidence in the wider economy.

“There are signs that the first-time buyer is starting to turn the corner,” said Morningstar Inc analyst James Krapfel.

First-time home buyers accounted for about 30% of US home sales last month, according to the National Association of Realtors.

Though this is below the 40% to 45% that the industry generally agrees is needed for a strong housing recovery, the share is growing as more young Americans qualify for mortgages and soaring rents motivate them to buy homes.

The federal government has made mortgages more attractive by lowering premiums on loans insured by the Federal Housing Administration, as well as proposing rules to allow downpayments of as low as 3%.

Low mortgage rates have also spurred demand, making it cheaper to own homes in some markets than to rent, said Michael Nunziata, vice-president at 13th Floor Investments, a Miami-based real estate investment firm.

Analysts said DR Horton is better positioned than its peers to capture demand from first-time home buyers, thanks largely to its aggressive marketing.

The company’s lower-priced “Express” communities, designed for first-time buyers, are expected to account for up to 30% of total home sales in the “foreseeable future”, chief executive David Auld said. This compares with 5% in 2014.

Although this will dent profit margins in the near term, the increase in buyers is likely to boost the company’s profit — especially when it no longer needs to spend so much on acquiring land. — Reuter

This article first appeared in The Edge Financial Daily, on April 24, 2015.