Housing Market to Receive Boost as Number of First-Time Homebuyers Expected to Rise
October 29 2019 - 8:00AM
The recovering housing market may soon receive a boost. A new
TransUnion (NYSE: TRU) analysis projects at least 8.3 million
first-time homebuyers will enter the mortgage market between 2020
and 2022. That number could climb to as high as 9.2 million if
economic growth exceeds expectations. Both growth projections mark
a significant acceleration from the 7.6 million first-time
homebuyers added in the last three-year period (2016-2018).
The analysis was released today by TransUnion’s mortgage
business unit at the Mortgage Bankers Association Annual Convention
& Expo. The findings come at a time when overall home ownership
growth has been muted. As of Q2 2019, 68.3 million consumers
carried a mortgage balance, on par with the 68.2 million observed
one year earlier in Q2 2018. The totals remain significantly lower
than a decade ago, when 73.1 million consumers carried a mortgage
balance in Q2 2010.
“While we’ve recently seen a boom in refi activity, actual
homeownership rates are down. Challenges have included high home
prices, sluggish wage growth and limited housing inventory,” said
Joe Mellman, senior vice president and mortgage business leader at
TransUnion. “But we may be starting to see daylight as slowing home
price appreciation, low unemployment, increased wage growth and low
interest rates are helping affordability. As a result, we are
optimistic that first-time homebuyers will contribute more to home
ownership than at any time since the start of the Great
Recession.”
Number of First-Time Homebuyer
Originations Expected to Rise in Next Three Years
Three-Year Date Range |
2020-2022* |
2016-2018** |
2013-2015 |
2010-2012 |
2007-2009 |
Millions of First-Time Homebuyers
(Originations) |
8.31 to 9.20 |
7.64 |
6.67 |
6.32 |
6.75 |
*Projection. **Note that we do not include 2019 as the year has
not yet completed. Projection for 2019 is 2.7 million.
Understanding the First-Time Homebuyer
To better understand what may be driving consumers to make their
first home purchases, TransUnion conducted a national survey in
October 2019. The survey included 943 U.S. residents who have never
owned a home and expressed interest in buying one in the next three
years.
These respondents’ top motivations to purchase a home included
seeking more privacy (45%) and wanting to build equity/wealth
(44%). Less than a quarter of respondents indicated that getting
married (24%) or expanding their family (23%) would be the top
reason to purchase a home. On the other hand, the number one reason
respondents would delay home purchase is due to concerns of not
having enough money for a down payment and/or monthly payments
(58%). About half of those respondents (51%) said they believed
they would need to meet a down payment requirement of 10-20%.
The survey also found that prospective new homebuyers delayed
their purchases because they wanted a more steady job (39%) and due
to home prices being too high (35%). Of those respondents who said
home prices are too high, 60% said they would relocate to another
city or state if the cost of a home was lower than at their current
location. Gen Z respondents, those born 1995 or after, were the
most apt to move (70%). TransUnion proprietary data support the
survey finding that people are willing to move for a new home: on
average, one out of five first-time homebuyer originations are
borrowed by a person who relocated from out of state.
TransUnion data also show that first-time homebuyers are younger
today than they were around the time of the Great Recession. The
median age of such homebuyers declined from 39 in 2010 to 36 in
2018. In fact, consumers aged 25-34 have seen their share of all
first-time homebuyers rise by 6%.
“There has been a lot of discussion in the marketplace that
younger people today may not be as interested as prior generations
in buying a home and being tied down to one location. Our survey
results suggest that is not the case at all. Rather, younger people
may have in fact been deterred from home purchase by challenges
they faced in the financially difficult times of the last decade.”
said Mellman. “Only 10% of respondents said being tied down to one
location would be a reason to delay home purchase. Just like others
before them, the younger generation seem to place value in home
ownership.”
Unaware of Funding Options
Even if potential homebuyers are willing to make such a
purchase, challenges continue to exist. Only one third of the
respondents said they actually understood the home buying process,
and only 1% of survey respondents said the home buying process was
easy.
Tellingly, many of those respondents who said they understood
the home buying process were under similar false impressions as
those who said they didn’t understand the home process. Two-thirds
(67%) of respondents believe that a high credit score is necessary
to purchase a home, and 41% of respondents believe a high down
payment is required to purchase a home. Furthermore, one in three
respondents (34%) said they were not familiar with any mortgage
financing options, and two-thirds of respondents were not familiar
with government-sponsored enterprises (GSEs) such as Fannie Mae and
Freddie Mac.
This finding suggests that consumers may not be familiar with
programs designed to increase access to mortgages, like those
specifically open to consumers with lower credit scores, or those
that require as little as 3% down payment.
“Many of our potential first-time homebuyer respondents don’t
seem to be aware of the wide variety of financing options available
to them. It suggests there’s a large opportunity for lenders to
proactively identify consumers who are interested in becoming
first-time homebuyers and then educating them on options they may
not be aware of. Consumers may find home ownership programs that
are more flexible than they originally thought, and lenders in turn
can gain new customers,” concluded Mellman.
For more information about TransUnion’s mortgage solutions and
to learn more about identifying potential new first-time
homebuyers, please click here.
About TransUnion (NYSE: TRU)Information is a
powerful thing. At TransUnion, we realize that. We are dedicated to
finding innovative ways information can be used to help individuals
make better and smarter decisions. We help uncover unique stories,
trends and insights behind each data point, using historical
information as well as alternative data sources. This allows a
variety of markets and businesses to better manage risk and
consumers to better manage their credit, personal information and
identity. Today, TransUnion has a global presence in more than 30
countries and a leading presence in several international markets
across North America, Africa, Europe, Latin America and Asia.
Through the power of information, TransUnion is working to build
stronger economies and families and safer communities
worldwide.
We call this Information for Good.®
http://www.transunion.com/business
Contact |
Dave
Blumberg |
|
TransUnion |
|
|
E-mail |
david.blumberg@transunion.com |
|
|
Telephone |
312-972-6646 |
TransUnion (NYSE:TRU)
Historical Stock Chart
From Aug 2024 to Sep 2024
TransUnion (NYSE:TRU)
Historical Stock Chart
From Sep 2023 to Sep 2024