August 2016 First-Time Buyer Index from AEI’s ICHR

The First-Time Buyer Mortgage Risk Index (FBMRI) for Agency purchase loans stood at 15.6% in August, unchanged from a year earlier. The Agency FBMRI is 6.4 ppts. higher than the repeat buyer MRI, up 6.0 ppts. from a year earlier. Setting a series high, FHA’s First-Time Buyer NMRI stood at 24.8% in August, up 1.0 ppt. from a year earlier.

Twenty20.

Contrary to news reports, the first-time buyer is alive and well in today’s home purchase market. Compared to two years earlier, the FTB share for August is up 2.5 ppts., while total FTB volume has surged 39%.

Other notable takeaways from the August First Time Buyer Mortgage Share and Risk Indices include:

• 53 percent of FTB loans were subprime or high risk (MRI above 12%) in August, down from 54% a year earlier.

• The combined FBMSI (measures share of first-time buyers for both government-guaranteed and private-sector mortgages) stood at 50.8 percent, down slightly from 51.2% the prior August.

• Fueled by solid job gains, low mortgage rates, and high and growing leverage, the national seller’s market is now in its 50^th Median home prices for the US as a whole have risen relative to median household income, retracing about a third of the drop from the 2006 peak to the 2012 trough, thus crimping affordability.

House prices will continue to rise as long as long as too much demand keeps chasing too little supply. Therefore proposals such as lower mortgage insurance premiums or higher loan limits, will only stimulate more demand, worsening affordability – not improving it.

With the addition of the data for August 2016, the First Time Buyer Mortgage Share and Risk Indices cover nearly 5.1 million Agency purchase loans dating back to February 2013.  The NMRI covers nearly 23.6 million Agency loans dating back to September 2012, comprised of over 10.7 million Agency purchase loans and over 12.9 million Agency refinance loans. The NMRI is published for purchase loans (with separate indices for first-time and repeat buyers), refinance loans (with separate indices for no-cash-out and cash-out refinance loans), and the composite of purchase and refinance loans.

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