After reaching a 50-year low of 2.684% in December, 2020, 30-year interest rates bounced in and around the upper 2’s for most of 2021, finally breaking and staying above 3% in October, 2021. Now in 2022, they sit – so far – at 3.22%. (Source: Freddie Mac Primary Mortgage Market Survey®).
As interest rates continue to rise, we will see more focus on purchase lending than on refi lending. A key market segment on many lenders’ radar is first-time home buyers (FTHB).
While government loan origination data explicitly has FTHB flag (see GovLoansVision), HMDA data does not. A HMDA data analyst might be tempted to go straight to age range and choose the under 25 and 25 to 34 values – which combined for 1,733,121 first lien, owner-occupied, home purchase mortgages in 2020 (source: HMDAVision). However, it’s important to remember that the definition of first-time home buyers can be broader:
- Someone who hasn't owned a principal residence for the three-year period ending on the date of purchase of the new home.
- Someone who has never owned a principal residence even if their spouse was a homeowner.
- Anyone who is a single parent who owned a home with their ex-spouse.
With this definition, we definitely need a better way than age to estimate the FTHB market. We’ll keep this post short, and only summarize that by intersecting multiple fields from HMDA, Census, and secondary market data, we can estimate the market potential at multiple layers. The inner layers of our model show our estimate of the size of the FTHB market:
By April 2 we’ll have 2021 HMDA data loaded in HMDAVision, and we’ll be able to update this estimate. And if past geographical patterns hold, this is where we expect to see FTHB purchases:
Source: CPSVision, Current Population Survey, ASEC (March 2021)
Note: Divisions defined by the U.S. Census Bureau.
- South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV),
- East North Central (IL, IN, MI, OH, WI) ,
- Pacific (AK, CA, HI, OR, WA)
- Middle Atlantic (NJ, NY, PA)
- West South Central (AR, LA, OK, TX)
- West North Central (IA, KS, MN, MO, NE, ND, SD)
- Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)
- New England (CT, ME, MA, NH, RI, VT)
- East South Central (AL, KY, MI, TN)
We will continue to share our thoughts on the first-time home buyer opportunity. Next time, we will explore the share of first-time homebuyers from government purchase loans (from Ginnie Mae disclosure data modeled in GovLoansVision.) In the meantime, we welcome your thoughts on this topic – let us know what’s on your mind.