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24 | M R EP O RT FEATURE T he COVID-19 pandemic is a historically unique event for all sectors. There's no playbook, and it's clear that only some of our experience through the housing crisis will help us to navigate to- day's challenges. We've had to get comfortable with the wait-and-see strategy, ready to pivot on the latest regulatory guidance, jobs report, or stay-at-home order. As we head into 2021, there's one seg- ment of the housing market that remains an important bellwether even in these uncertain times: the first-time homebuyer market. First-time homebuyers are important because they take a housing unit from the market, but don't give one back, creating pure growth in homeownership. Over the past five years, the first-time homebuyer segment has grown tremendously. However, they have not been immune to the impact of the COVID-19 pandemic. To best support the health of this important segment of the hous- ing market in the New Year, it's helpful to have an idea of what first-time homebuyers have going for—and against—them. 2020's First-Time Homebuyers E ven though 2020 has been an unprecedented year, looking at years past can help us see how this segment of the market fares during times of crisis. For exam- ple, during the 2001 recession trig- gered by 9/11, the number of first- time homebuyers fell by 14% to 1.95 million and the decline lasted for one year. In 2002, the first-time homebuyer market recovered to more than two million. The financial crisis of 2008 resulted in over 3 million first-time homebuy- ers being absent from the housing market through 2015. Today, first-time homebuyers make up a significant segment of homebuyers, accounting for more than half of all purchase mort- gage borrowers at over 2 million for the past three consecutive years. Due to the size of this group, mortgage professionals across the housing industry can all agree that this is a segment of the market that simply cannot be ignored. They've proven resilient, so first-time homebuyers will continue to remain an important force to watch throughout the recovery in 2021 and beyond. Despite enormous challenges, the housing finance system has been able to maintain credit availability for first-time home- buyers throughout the pandemic. Our Chief Economist Tian Liu reported in his recent First-Time Homebuyer Market Report that the percentage of home sales to first-time homebuyers did not decrease from pre-COVID-19 levels, and the percentage of first- time homebuyers using low-down payment mortgages increased to 83%, which is higher than the historical average. A few main reasons have allowed the housing finance system to largely maintain credit availability throughout 2020: continued investment in technol- ogy to increase capacity elasticity within the industry, laser-focus on prudent underwriting, and adequate capital availability in the mortgage finance system. As we look to 2021, mortgage professionals and industry partici- pants are wondering if there will be any permanent changes in lo- cation and desired home type as a result of the COVID-19 pandemic. Currently, the evidence is varied. The rapid rebound in the housing market, especially in areas hit hard earlier in the year suggests limited changes to homebuyer behavior. This is why working to- gether as an industry to continue to support first-time homebuyers entering the market will remain a critical task in maintaining and supporting growth in this seg- ment. 2021 Tailwinds A few pandemic-related events may give first-time homebuy- ers some air, one of which is the approval of one or more COVID- 19 vaccines that will likely speed up the re-opening of the U.S. economy. Younger workers in their peak first-time homebuying ages have fared worse during the recession as businesses tightened hiring of inexperienced workers that typically require training. As of September, 8.7% of work- ers between the ages of 25 and 34 are unemployed, compared to unemployment rates of under 7% for workers over the age of 34. A COVID-19 vaccine could also Mortgage Tailwinds & Headwinds How first-time homebuyers managed to grow during the pandemic, and what's in store for them in 2021. By Rohit Gupta