TheMReport — News and strategies for the evolving mortgage marketplace.
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42 | TH E M R EP O RT 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 Buying Like It's 1999 First-time homebuyers are reclaiming market share, matching that of 1999. F irst-time homebuyers are buying like it's 1999, according to an August Genworth Financial re - port, which said 570,000 single- family homes were purchased in the second quarter of 2017. This is compared to Q1 2017's 426,000 homes and is the highest num - ber of first-time purchases in a second quarter since Q2 of 1999. Of all single-family homes sold during Q2 2017, 36 percent were first-time homebuyers, up from 34 percent in Q2 2016. In the mortgage market, 57 percent of all purchases originated came from first-time buyers, an increase from 56 percent a year ago. According to the report, historically, first- time homebuyers accounted for 35 percent of the single-family hous - ing market and 45 percent of the purchase mortgage market. "The rapid growth in the first- time homebuyer market that began in 2015 continued into the second quarter. As the housing market matures, first-time homebuyers are becoming an even more important source of growth," said Tian Liu, Chief Economist for Genworth Mortgage Insurance. "Whether one looks at the 3 million missing first-time homebuyers since 2007 or the historically low homeowner - ship rate among young households, the potential growth opportunity remains large and will likely take years to play out. The current housing cycle will be defined by first-time homebuyers." According to Liu, homebuild - ers have begun adjusting their products further down the pricing curve to cater to the fact that first-time homebuyers are outpac - ing the rest of the single-family housing market. Homebuilders are trying to build more single- family homes between $200,000 and $250,000, which is the most popular price range among first- time homebuyers. However, he said that the growth in supply still isn't matching the demand, leaving many first timers frozen out of the market. New and affordable starter homes have led to a sharp decline in vacant homes for sale, accord - ing to the report. 1990s numbers aren't only reflected in first-time homebuyer purchases, but also homeowner vacancy rates, which are at the lowest levels since 1994. Genworth believes this will spur continued home price appreciation. "While many forecasters predict that increased supply will stem home price appreciation, we believe a slowdown in home price appreciation will be unlikely in 2017 and 2018," said Liu. "We do not believe that the strong growth in home prices is leading to another housing bubble. A key feature of housing bubbles is speculative demand. Today, first- time homebuyers are out-bidding investors and cash-buyers." Closing Timelines, Average FICO Scores Tick Up Slightly The number of days it takes to close a loan and the average FICO score of homebuyers increase by one. T he closing time for all loan types ticked up a tad in June to 43 days, up from 42 days the month before, according to Ellie Mae's June 2017 Origination In - sight Report. The time to close a refinance stayed steady at 41 days, while the time to close a purchase loan advanced to 43 days, up from 42 days in May. The average 30- year rate for all loans deflated to 4.27 in June from 4.33 in May. Regarding closing rates for all loan types, those edged down a hair to 70.3 percent in June from 70.4 percent in May. Closing rates on refinances cooled slightly to 63.5 percent from May's 63.8 percent, and closing rates on purchases dropped to 75.1 percent in June from 75.3 percent the prior month. In terms of average FICO score distribution, 69 percent of all closed loans recorded FICO scores over 700. The average FICO score on loans closed in June was 724, up from 723 in May. Seventy-two percent of purchase loans inked FICO scores over 700. Additionally, 64 percent of refis had FICO scores exceeding 700. The average FHA-purchase FICO score held steady at 683 in June, mirroring May's num - ber. FHA refinance FICO scores tumbled to 647 in June, down from 650 in May. Conventional refinance FICO scores hopped to 729 in June, a tiny lift from 728 in May. Conventional purchase FICO scores grew to 754, up a point from 753 the previous month. Ellie Mae's Origination Insight Report provides monthly data and insights from a sampling of closed loan applications that flow through Ellie Mae's Encompass all-in-one mortgage management software and its Ellie Mae Network. The report focuses on loans that closed in a specific month and compares their characteristics to similar loans that closed three and six months earlier. "We believe a slowdown in home price appreciation will be unlikely in 2017 and 2018." —Tian Liu, Chief Economist, Genworth Mortgage Insurance.