August 24, 2014

First-time homebuyer shares declining

Aug. 20, 2014 – First-time homebuyers aren't as active in the current housing market as they used to be and in states where home prices are rising, the first-time buyers' purchasing share tends to decline, according to a Federal Housing Finance Agency report.

"First-time homebuyers make up a smaller share of sales than they have historically," NAFCU Chief Economist and Director of Research Curt Long said. "With affordability conditions declining, it's unlikely that trend will reverse in the near future."

FHFA released a report in October that examined loans sold to Fannie Mae and Freddie Mac or issued by the Federal Housing Administration. The Wall Street Journal reported that these entities backed more than 80 percent of all loans made since 2009. Regarding first-time homebuyers, the FHFA report found that "first-time homebuyer shares were relatively stable until 2000" and that they reached a peak of 63 percent in 2009, when Congress issued a homebuyer tax credit. Since then, the numbers have drifted downward, the report found, reaching 56 percent by 2013.

In an updated report, the FHFA broke out the first-time homebuyer share by state. It found that "almost 90 percent of states exhibit a negative correlation, suggesting that first-time homebuyer share decreases as house price growth increases." The report also found the opposite to be true: Declining house prices "tend to induce relatively robust home purchasing volume by first-time homebuyers."

NAFCU continues to reiterate the importance of the secondary market to credit unions as Congress continues to discuss housing finance reform.