First-time homebuyers accounted for a record share of agency purchase lending in the first quarter, as higher interest rates continued to dampen repeat buyer participation in the market, ICE Mortgage Technology reports.
At the same time, Gen Z buyers made substantial gains in more affordable states, while FHA loans regained popularity as a critical tool for affordability-minded homebuyers, the mortgage technology firm says in its latest Mortgage Monitor report.
“While first-time homebuyers continue to face affordability headwinds, they don’t have the same disincentive to transact as many repeat buyers, who remain locked in the golden handcuffs of relatively low monthly payments on their existing homes,” says Andy Walden, head of mortgage and housing market research for ICE, in the report. “Younger homebuyers are picking up market share with lenders this spring, with people age 35 and under accounting for more than half of financed home purchases by first-time buyers in the first quarter.”
First-time homebuyers made up 58% of such purchase lending in the first quarter – the highest share on record.
Notably, while repeat-buyer activity has softened markedly from pre-pandemic levels – with originations among this group down 31% compared to 2018 and 2019 – first-time homebuyer volume has seen less compression, declining only 19%.
In fact, purchase lending overall has made up a larger share of issuance in recent years, with purchase loans accounting for a record 82% of agency lending in 2023, more than 75% last year, and nearly three-quarters in the first quarter.
Younger buyers are also starting to reshape the homeownership landscape. Gen Z, the oldest of whom are 28, accounted for roughly one in four first-time homebuyer mortgage originations.
Gen Z participation is higher in lower-cost markets, with Indiana, South Dakota, and Kentucky seeing Gen Z shares top 30% of first-time homebuyer activity.
However, affordability challenges continue to constrain Gen Z participation in higher-priced coastal markets. D.C. has the lowest share of Gen Z buyers, with a mere 7% of all purchase mortgages and 11% among first-time homebuyers. California is close behind, with Gen Z comprising 8% of purchase and 13% of first-time homebuyer loans.
Photo: Alexander Dummer