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TH E M R EP O RT | 35 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION The Makings of a First-Time Homebuyer A study outlines some of the characteristics of a new generation of homebuyers. A homebuyers' journey takes many stages during the course of their life. From renting to owning, the characteristics of homebuyers change, and Liberty Street Economics, the Federal Reserve Bank of New York blog outlines some of those characteris- tics in a recent report. Successfully transitioning from renting to becoming a homeowner depends on a consumer's ability to manage the financial obligations involved in purchasing a house, as well as the creditworthiness of the buyers themselves. At the outset of the millennium, average mortgage balances for first-time and repeat buyers were similar, with the average mortgage balance being $128,000 for first- time buyers and $152,000 for repeat buyers. Rising home prices during the housing bubble increased mortgages for repeat buyers more than for first-time buyers. From 2003–2006, the average mortgage balance for repeat buy- ers increased by $68,000, or 13% annually. First-time buyers saw their average mortgage balance increased by just 8%, or $33,000. According to the report, from 2000–2016, the average mortgage balance for first-time homebuyers rose by 84% compared to 92% for repeat buyers. Another important factor is the buyer's credit score. The average credit score for repeat buyers in 2000 was 705, slightly higher than the credit score for first-time buyers (670). After seeing a bump to 683 during the years 2003-2006, first-time buyers eventually saw their average credit score fall to 673. Credit scores for both first-time and repeat buyers would increase beginning in 2007. This trend continued until 2013 when the average credit score reached 717 for first-time buyers and 757 for repeat buyers. The spread between the average credit score of first-time and repeat buyers is just 37 points. One area of growing concern is student loan debt, and in 2000 there was essentially no difference in the size of loans from first-time to repeat buyers. The average rate was around $14,000 for both first-time and repeat buyers. The average student loan debt grew faster for repeat buyers than first- time buyers from 2003–2010, and by 2010 the gap between the two buyers reached $11,000. As of 2016, the average student loan debt for first-time buyers had reached $29,000, compared to $42,000 for repeat buyers. Liberty Street Economics reported that any of the above factors could impact the decision of when people are ready to buy a home. In 2000, the average age of the first-time buyer was 37.9 years old, compared to 44.7 years old for repeat buyers. The report added that the average age of the first-time buyer fell over the next few years, dropping to 35.4 years old (but increased to 47.5 years old for repeat buyers). The average age of first-time buy- ers in 2016 fell to 32, while the aver- age age of repeat buyers rose to 46. The final characteristic—aver- age ZIP code income—remained relatively unchanged between 2000–2016. The average ZIP code income for first-time buyers remains around $58,000, while repeat buyers' average ZIP code income is around $67,000. Housing Market: Staying Strong Learn why the housing market might be more robust than predicted. T he housing market in 2019 may be stronger than originally predicted, according to a recent report from realtor.com. The site's updated 2019 housing forecast indicates a shift in the economic outlook. A higher home price growth of near 3%, stronger home sales and a slower pace of mon- etary tightening may lead to lower mortgage rates of 4.5% by the end of the year. "The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019," said Danielle Hale, realtor.com's Chief Economist. "We believe 2019 will be character- ized by lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers' purchasing power beyond what we initially projected. This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago." Long-term mortgage rates have been brought down to around 4%, due to Fed's decision to hold out on future rate hikes. Before the Fed's decision, realtor.com's data suggested an increase in upward momentum spurred by continued economic growth and monetary policy tightening. Home prices are expected to be higher than previously anticipated, as mortgage rates fall and buyers gained more purchasing power. realtor.com anticipates home prices in 2019 to be 2.9% higher than in 2018, 0.7% higher than the original prediction. Home sales slipped in 2018, and are still anticipated to decrease in 2019, but realtor.com notes that this year's drop in home sales should remain essentially flat with 2018. Initially, realtor.com expected home sales to drop 2% year over year, but increasing inventory levels and lower mortgage rates should give the market a boost in this area. Data from the Census Bureau and the Department of Housing and Urban Development shows that increas- ing inventory from has already spurred new sales. "New home sales data con- tinues to show strength with 692,000 new home sales, up 3% from last year's sales," Hale said. "This trend supports the fact that lower mortgage rates have started to entice buyers this spring and foreshadows a poten- tial strengthening of pending and existing home sales in the months to come." "Looking forward, orders should also help bolster builder confidence and boost new construction. We've already seen a slight improvement in builder confidence," she said. "Continued moderation in the median price due to an increase in the share of sales in the $200,000-$300,000 category is also a good sign. In this housing market, affordability for buyers is key." "The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019." —Danielle Hale, realtor.com's Chief Economist