First-time homebuyers, including millennials, are slowly but surely making their way into the housing market and lenders need to be prepared to grab their attention and keep it.
The National Association of Realtors (NAR) recently reported that the share of first-time buyers remained at 32 percent in January for the second consecutive month and is up from 28 percent a year ago. First-time buyers in all of 2015 represented an average of 30 percent, up from 29 percent in both 2014 and 2013. During pre-crisis years, first-time homebuyers averaged 40 percent or more of the market.
Freddie Mac's VP, Danny Gardner, said that low mortgage rates, stabilizing housing markets, and the nation's 86 million millennials and rapidly growing immigrant communities, are expected to produce about 1.2 million new households a year for the next ten years, based on statistics from the Harvard Joint Center for Housing Studies and the Collingwood Group.
Gardner noted that more first-time homebuyers can be welcomed into the housing market if they are provided more information. "As an industry, we have to drive a stake through a few stubborn myths that are draining life out of the market. These familiar myths lead potential buyers to overestimate the credit, income and downpayment savings they need for an affordable mortgage," he said.
In addition, lenders can produce more sales to first-time buyers by getting myth-dispelling information into the hands of families who don't know how ready they are to buy their first home and to families who gave up trying after being rejected for a mortgage once, according to Freddie Mac.
The American Enterprise Institute (AEI) International Center on Housing Risk found that the share and volume of first-time homebuyers increased year-over-year in December.
According to AEI's First-Time Buyer Mortgage Share Index (FBMSI) released Tuesday, first-time buyers accounted for 56.7 percent of primary owner-occupied home purchase mortgages with a government guarantee in December 2015. This number is 1 percent above the December 2014 share of 55.5 percent.
AEI credits "improvements in the labor market, riskier mortgage lending, and continuing low mortgage rates" for the spike in first-time buyers.
“On a year-over-year basis, first-time buyer demand increased in December, continuing the trend of the last 14 months," said Edward Pinto, Codirector of AEI’s International Center on Housing Risk. “Strong demand, in combination with shortness of supply, is driving home prices up faster than incomes and inflation.”