First-time buyer volume surged 15 percent in May and the first-time buyer share of home purchase loans continued to climb as well, according to a Tuesday report from the American Enterprise Institute.
The agency’s First-Time Buyer Mortgage Share Index (FBMSI) found that in May, first-time buyers accounted for 59.1 percent of primary owner-occupied home purchase mortgages with a government guarantee. This is up from last May’s share of 58.7 percent.
Also according to the report, first-time buyer share has been trending higher on a year-over-year basis, pushed up by improvements in the labor market, riskier mortgage lending, continuing low mortgage rates, and a growing number of buyers who lost a home to a foreclosure or short sale more than three years ago.
“These factors, combined with a 44-month-long seller’s market for existing homes as reported by the National Association of Realtors, have been driving up home prices faster than income,” the report stated.
Also, the number of primary owner-occupied purchase mortgages going to first-time buyers in May totaled an estimated 137,000, up 15 percent from May 2015. May marked the 13th month of the past 14 months with year-over-year double-digit increases in first-time buyer volume.
The Combined FBMSI (which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages) grew slightly, to 53.2 percent, up from 52.9 percent last May.
“The 2016 spring buying season continues to be exceptionally strong for first-time buyers, as both purchase loan share and volume once again hit series’ highs for the month of May,” said Edward Pinto, co-director of AEI’s International Center on Housing Risk. “Increasing demand pressure against a constrained supply continue to drive real home prices higher. While bullish in the short-medium term, long term prospects point to a painful mean reversion down the road.”
“First-time buyer activity has been on a steep uptrend so far this year,” said Stephen Oliner, co-director of AEI’s International Center on Housing Risk. “All signs point to a robust spring and summer homebuying season.”