Report: 8.3M First-Time Buyers Are Coming

October 31, 2019

A surge in first-time home buyers is expected to hit the housing market over the next three years. About 8.3 million first-time buyers are projected to enter the mortgage market between 2020 and 2022, predicts a new report from TransUnion. That marks a jump from the 7.6 million first-time buyers that were added in the previous three-year period between 2016 and 2018.

However, plenty of housing market challenges persist for new buyers, including higher home prices, sluggish wage growth, and limited housing inventory. “But we may be starting to see daylight as slowing home price appreciation, low unemployment, increased wage growth, and low interest rates are helping affordability,” says Joe Mellman, senior vice president and mortgage business leader at TransUnion. “As a result, we are optimistic that first-time home buyers will contribute more to homeownership than at any time since the start of the Great Recession.”

TransUnion chart

© TransUnion

First-time home buyers are younger today than they were around the time of the Great Recession. The median age of buyers fell from 39 in 2010 to 36 in 2018. The first-time home buyer share has increased by 6% among 25- to 34-year-olds, according to TransUnion’s research.

TransUnion surveyed 943 residents who have never owned a home but plan to buy within the next three years. Their top motivators to purchase a home were to seek more privacy (45%) and to build equity or wealth (44%). Other common reasons included getting married (24%) and expanding their family (23%).

But the most common reason respondents cited for delaying a home purchase was concerns of not having enough money for a down payment or monthly payments (58%). Half of those respondents—or 51%—said they believed they needed to meet a down payment require of 10% to 20% to buy a home.

Greater buyer education may be needed. Many respondents said they don’t understand the homebuying process. Sixty-seven percent believed a high credit score is necessary to purchase a home, and 34% said they were not familiar with any mortgage financing options. Consumers were unfamiliar with mortgage programs available to people with lower credit scores or those that require only 3% down.

“Many of our potential first-time home buyer respondents don’t seem to be aware of the wide variety of financing options available to them,” Mellman says. “It suggests there’s a large opportunity for lenders to proactively identify consumers who are interested in becoming first-time home buyers and then educating them on options they may not be aware of. Consumers may find homeownership programs that are more flexible than they originally thought, and lenders in turn can gain new customers.”

Respondents also cited other common reasons for delaying a home purchase, such as desiring a more steady job (39%) and home prices being too high (35%). Sixty percent, however, did say they would be willing to relocate to another city or state if the cost of a home was lower than at their current location. Generation Z respondents, born in or after 1995, were the most likely to say they’d be willing to move.

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