We see that prices and costs are rising in the homebuyer market, but how do we maintain growth, especially with first-time homebuyers? Historically, first-time homebuyers have relied on mortgage products that allow for lower down payments (loan-to-value greater than 80%), demonstrating that down payments can be a barrier to entry into the housing market for first-time homebuyers when compared to repeat purchasers. Supporting this point, 454,000 (79%) of first-time homebuyers used low-down payment mortgages this quarter. Policymakers, lenders, and housing advocates pushing for increased homeownership should take this factor into account. While this percentage hasn’t increased over the last year, it is up four percentage points over the past three years.
Government lending has long been a critical tool for first-time homebuyers. However, during the second quarter, government lending programs were down 5% from a year ago, helping 252,000 homebuyers. Homebuyers using these programs represented 44% of all loans, its lowest level since the first quarter of 2008. Government programs were necessary during the housing crisis, but the first-time homebuyer market is no longer in need of this level of government assistance. This diminishing presence has many borrowers and lenders moving to better alternatives.
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