First-time homebuyers have consistently accounted for about half of all home purchase mortgages since 2002, according to a new report from the Consumer Financial Protection Bureau.
Specifically, the report examined the credit characteristics and product usage of first-time buyers, the demographics of first-time buyers, and where first-time buyers are able to buy.
At the end of 2018, the average home price in the United States was 12 percent above its 2007 peak. Additionally, housing inventory is at historic lows. Despite this, first-time homebuyers have steadily continued to account for about 50 percent of home mortgages each year since 2002. While 600,000 fewer mortgages went to first-time buyers in 2018 than in 2002, this is primarily a result of the overall decline in the purchase market during the financial crisis of 2007 to 2009 and the steady recovery since 2011.
Incomes have risen during that span, but the median combined loan-to-value ratio and median debt-to-income ratio have both increased since 2002. These looser CLTV and DTI standards, however, have mainly helped first-time borrowers with higher credit scores, the report said. In 2018, the median credit score of first-time buyers was 32 points higher than in 2002. Rural borrowers, however, tend to have lower DTIs and lower credit scores than their urban counterparts.
Generally, first-time buyers obtain mortgages at the same age they did before the financial crisis. The median age of first-time buyers in 2018 is the same as it was in 2002 and 2003, 32 years old.
When broken down by race and ethnicity, however, black borrowers become first-time buyers noticeably later, the report said. In 2018, the median first-time black borrower was six years older than the median non-Hispanic white borrower. In 2002, the age gap between black and white first-time borrowers was just two years.
First-time borrowers in more costly metropolitan statistical areas tend to be older than buyers in more affordable MSAs. Median age decreased in the lead-up to the recession, but has largely returned to pre-housing-boom levels in many lower-cost MSAs. In higher-cost MSAs, it has increased to levels higher than in 2002.
Loans insured or guaranteed by the Department of Agriculture have become an increasingly important source of credit for rural first-time borrowers. In 2018, USDA loans accounted for 17 percent of loans originated for rural first-time buyers, compared to 5 percent of the entire first-time borrower market.
The report explores the prevalence and ease of first-time homeownership over time. It looks at trends regarding the credit characteristics and product usage of first-time buyers, the demographics of first-time buyers, and where first-time buyers are able to buy.
The analysis uses data from the National Mortgage Database, a nationally representative, 5 percent sample of all outstanding, closed-end, first-lien, one-to-four family residential mortgages.