According to TransUnion, as many as 17 million consumers could buy homes for the first time over the next five years. And if recent data is any indication of how things will go in the future, these first-time buyers will get younger and younger.
Since the year 2000, consumers between the ages of 20 and 29 have made up an increasingly larger percentage of first-time homebuyers. In Q4 2000, just 17 percent of first-time homebuyers were in their 20s; by Q4 2015, the percentage had increased to 28 percent, according to TransUnion.
A similar large increase among first-time homebuyers was seen for consumers ages 20 to 39 during that same time period. In the fourth quarter of 2015, approximately 60 percent of first-time homebuyers were in this age group; this number is up considerably from 15 years earlier, when it was just 44 percent in Q4 2000.
“First-time homebuyers are valuable prospects in the eyes of many mortgage lenders, as that time in a borrower’s life often corresponds to additional financial needs,” said Joe Mellman, VP and Mortgage Business leader for TransUnion. “It is evident from trended data that first-time homebuyers show distinct credit characteristics that distinguish them from non-buyers. They often have higher credit scores than non-buyers; yet even within the same credit risk band, they are often more credit active and exhibit more credit responsible behavior. First-time homebuyers also can positively impact the economy as a whole. While they themselves can build wealth through gains in equity, along with mortgage interest and real estate tax deductions, local communities benefit from economic activity as a result of construction, remodeling and home improvement activities.”
TransUnion estimates that between 13.8 and 17.1 million first-time buyers will enter the housing market over the next five years, based on consumers who currently do not have a mortgage combined with long-term mortgage purchase market growth and the percentage of first-time buyers in the agency and government purchase market.
By comparison, almost half of the 6.2 million consumers who bought a home in 2015 (3 million) were first-time buyers. The share of first-time homebuyers comprising agency and government loan purchases in 2015 was 55 percent; 15 years earlier, as the new millennium began, the share was less than half.
“It’s clear that there should be many new homebuyers in the market in the next few years,” said Steve Chaouki, EVP and head of TransUnion's financial services business unit. “Our hope is that, with the use of trended data, mortgage lenders can better serve these consumers. We anticipate the benefits of trended data will continue to expand to other lenders, as we believe this is the future of credit scoring.”