The American Enterprise Institute (AEI) International Center on Housing Risk recently released a report, finding that 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.”
According to AEI, The first-time buyer mortgage share and mortgage risk indices are key housing market indicators based on monthly data for nearly all government-guaranteed home purchase loans, which greatly reduces the risk of sample error.
The Federal Housing Administration (FHA) first-time homebuyer percentage reached a share at or above 80 percent, while Freddie Mac is at the low-end with a share of about 40 percent, AEI noted. Fannie Mae’s share has consistently hovered above Freddie Mac’s at 46.7 percent in June.
“The rising first-time buyer share and the strong increase in first-time buyer sales volume shown by our broad measure help explain the tightening inventory conditions in the long-running seller’s market,” AEI said. “The unsold inventory of existing single-family homes stood at 5.2 months in May, down from 5.6 months a year earlier; for new single-family homes, the unsold inventory was 4.5 months in May, down from 5.1 months a year earlier.”
The number of primary owner-occupied purchase mortgages going to first-time buyers in June totaled an estimated 128,000, up 20 percent from the 107,000 mortgages in June 2014, according to AEI. This loan count increase surpassed the 15.5 percent rise in total agency loan purchase volume during the same period. Almost 55 percent of first-time buyer loans were high risk (MRI above 12 percent) in June, up from 51 percent a year earlier.
“We paint an accurate picture of changes in the first-time buyer share by using a nearly complete census of agency loans,” said Stephen Oliner, codirector of AEI’s International Center on Housing Risk. “In contrast, the monthly changes in the first-time buyer share from the NAR survey are often just noise.”