The number of first-time homebuyers is growing steadily in the housing market as mortgage rates remain low, labor conditions improve, and lending loosens up.
Freddie Mac's latest numbers revealed that the GSE financed affordable mortgages for almost one million first-time homebuyers and more than 4.5 million low- and moderate-income borrowers between 2009 and 2015, according to a blog on the company's website titled "Freddie Mac: First-Time Homebuyer Gains Hold Steady in 2015."
The most active states for first time homebuyers in 2015 are California, Texas, Florida, Illinois, New York, Pennsylvania, Ohio, New Jersey, Michigan, and Washington, Freddie Mac data shows.
"Year to date, the company is on track to match its best year financing mortgages for first-time homebuyers since the beginning of the Great Recession," Freddie Mac said.
Lenders have delivered an average of 17,000 first-time homebuyer mortgages a month to Freddie Mac from January 2015 to June 2015, the blog noted. This number lines up with last year and is 25 percent higher than the 2013 average.
"The increase is due to a combination of factors including general economic trends, low mortgage rates, Freddie Mac lender alliances and outreach initiatives plus low down payment mortgage products such as Home Possible Advantage," the blog explained. "Home Possible Advantage requires down payments of as little as 3 percent, and the source of these funds may include a gift from a family member or employer, or a grant from a housing agency."
The American Enterprise Institute (AEI) International Center on Housing Risk recently released a report, finding that the first-time buyer share in April, May, and June was launched to new highs, supported by improvements in the labor market, riskier mortgage lending, and continuing low mortgage rates. First-time buyers account for 58.8 percent of primary owner-occupied home purchase mortgages with a government guarantee, up from 57.2 percent the prior June, according to the Agency First-Time Buyer Mortgage Share Index (FBMSI).
The Combined FBMSI, which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages reached an estimated 52.9 percent, up from 51.6 percent the prior June, according to the report.
In addition, AEI determined that the Agency First-Time Buyer Mortgage Risk Index (FBMRI) stood at a series record of 15.83 percent, and increase of half of a percentage point from the average over the prior three months and up 1.1 percentage points from a year earlier. The Agency FBMRI is 6.75 percentage points higher than the mortgage risk index for repeat homebuyers, a gap that continues to widen.
“The housing lobby, led by the NAR and the Urban Institute, has successfully pushed for looser lending standards for first-time buyers,” said Edward Pinto, codirector of the AEI’s International Center on Housing Risk. “Rather than increasing accessibility, the loosening of lending standards during a strong seller’s market is moving the goalpost further away for many lower-income and minority renters desiring to become homeowners.”
A Zillow analysis in August also found that first-time homebuyers in the market today are waiting longer periods of time to purchase a home and are less likely to be married compared to first-time buyers in the 1970s and 1980s.
The Zillow study found that Americans are renting for an average of six years before buying their first homes. Meanwhile, in the 1970s, they rented for an average of 2.6 years. In addition, 52 percent of first-time homebuyers were married in the late 1980s, while today, only 40 percent are married.
"Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home," Gudell said. "We know millennials value home-ownership and want to buy. The next challenge will be figuring out how they can save for a down payment and qualify for a mortgage, especially while the rental market is so unaffordable all over the country. The last hurdle will be finding a home they like amidst very tight inventory, especially among starter homes."