Oct. 20, 2016
NEW YORK – Oct. 18, 2016 – About 17 million first-time homebuyers may enter the housing market within the next five years, according to a new TransUnion study – and nearly three million first-timers are expected to enter the housing market in 2017.
TransUnion's study found that younger consumers (ages 20-39) represent an increasing majority of first-time homebuyers. At the start of the new millennium, first-time homebuyers comprised less than half of agency and government loan purchases; by 2015, this had grown to over 55 percent. In the fourth quarter of 2015, consumers in this age group represented 60 percent of first-time homebuyers, up from 44 percent five years earlier.
The youngest consumer subset observed, those ages 20-29, also has seen major growth among first-time homebuyers: Their share has risen from 17 percent to 28 percent over the same timespan.
"First-time homebuyers are valuable prospects in the eyes of many mortgage lenders, as that time in a borrower's life often corresponds to additional financial needs," says Joe Mellman, vice president and mortgage line of business leader at TransUnion.
Mellman says that potential first-time buyers have "distinct credit characteristics that distinguish them from non-buyers." Those characteristics include higher credit scores than non-buyers" but they're also "more credit active and exhibit more credit responsible behavior."
Partnering with AnswerMine, TransUnion developed a model examining thousands of credit attributes and scores. The resulting "First-Time Homebuyer Propensity Model" identifies specific consumers likely to become first-time homebuyers. By using this model, TransUnion determined that there could be nearly three million first-time homebuyers over the next year.
"We are quite pleased with the model's accuracy in identifying first-time homebuyers. In a study earlier this year, we predicted just over 500,000 first-time homebuyers for the first quarter of 2016. Looking back at that time now, it turns out that is how many first-time homebuyers there actually were," says Mellman.
Looking over the next five years, TransUnion estimates 13.8 to 17.1 million first-time homebuyers will enter the housing market based on U.S. consumers who don't currently have a mortgage, long-term estimates for growth, and the percentage of first-time homebuyers in the agency and government purchase market.
If the model is accurate, it would add a significant number of consumers to the mortgage pool. For comparison, 6.2 million consumers opened a new mortgage in 2015, approximately three million of which were first-time homebuyers.
"It's clear that there should be many new homebuyers in the market in the next few years," says Steve Chaouki, executive vice president of TransUnion's financial services business unit. "Our hope is that, with the use of trended data, mortgage lenders can better serve these consumers. We anticipate the benefits of trended data will continue to expand to other lenders, as we believe this is the future of credit scoring."
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