Feels Like The First Time; Homebuyers, That is

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According to Genworth’s most recent First-Time Home Buyer Market Report, first-time homebuyers play a pivotal role in influencing housing inventory and home prices because they represent the shift in demand from rental to owner occupancy. Talk about having a firm grasp of the obvious.

Over the past 20 years or so, first time home buyers have represented about 45% of the purchase home mortgages originated. That’s about 1.8 million single-family homes per year.

In fact, during the recent housing recovery, in the past 5 years, they represented about 65% of the sales and over 85% percent of the growth in the past 2 years.

The downside is that this much demand by these first-time buyers has drastically reduced the supply of affordable housing needed to continue to feed the beast.

That is why continued, and additional, affordable housing programs are needed with an increase in new construction at the lower price range.

In addition, these buyers need low down payment lending programs to suit their needs. For now, FHA seems to be the product of choice.

However, according to Genworth, private capital is making its way back into this market. Also as home prices rise at the lower end some builders may see some opportunity in new home construction in this price range.

Much still hinges on the economy. If the economy continues to grow, these first-time buyers may see some wage growth that allows them to keep current with any rise in home prices and mortgage rates.

This may spur more current homeowners to move up increasing the supply of affordable homes available for first-time buyers.

With potential first-time buyers growing, aided by the influx of Millennials, who are entering the market late, we could be looking at a potential market of these buyers at well over 2 million per year over the next few years. First-time buyers are still out there looking for homes. That spells opportunity for lenders.

So, if you’re looking for more business you may want to look to service the needs of the first time home buyer. It may be a little riskier. But, done right, it could provide some much-needed rewards.

Quality, compliant loans at any level are good business.

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.