First-time Buyers Maintain Control of Mortgage Market: Urban Institute

By Karan Kaul

First-time homebuyers face a difficult housing market: high prices, low supply, tight credit, and renting costs that make it difficult to save for a down payment. But compared with repeat buyers, first-timers have dominated the mortgage market for the past 10 years, and their share today is still high. We don’t see this changing anytime soon.

The Federal Housing Administration (FHA), which makes low–down payment loans available to borrowers with less than perfect credit, has typically focused on the first-time homebuyer market, with first-timers making up about 80 percent of their total originations. That share fell to around 75 percent during the recession but has slowly crept up to nearly 83 percent today.

The government-sponsored enterprises’ (GSE’s) share of first-timers was much lower than the FHA’s historically—about 25 percent during the early 2000s—but it increased to about 40 percent during the housing bubble. After falling slightly during the recession, the GSE share of first-timers has been on a sustained upswing since 2013 and is just shy of 50 percent today.

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