WASHINGTON–First-time buyer (FTBs) volume jumped another 3% in August 2017, as compared to August 2016, according to new data from the American Enterprise Institute’s International Center on Housing Risk.
First-time buyer volume has increased 42% since August 2013. As volume increases, so has FTB risk, which has increased by three percentage points, according to AEI’s FTB National Mortgage Risk Index (FBMRI). The update noted that “too much demand, enabled by increasing leverage, is chasing a limited supply, all of which is driving up house prices.”
Meanwhile, the FBMRI for Agency purchase loans hit 16.3% for August 2017, which is 6.9 percentage points higher than the MRI for repeat buyers. FHA’s First-Time Buyer NMRI reached 26.5% in August 2017, up 1.6 percentage points from one year earlier and 2.4 percentage points from two years earlier.
“The home price boom that started in mid-2012 is accelerating, with year-over-year increases now running at 6%-7%,” said Edward Pinto, co-director of AEI’s International Center on Housing Risk.
Pinto added that the soaring and price of entry-level homes is driving more FTBs into taking on greater levels of risk.
The FBMRI update also revealed that the median FTB puts down only $5,300, or 3%.
Tobias Peter, senior research analyst of AEI’s International Center on Housing Risk, says that an even wider credit box is not the answer. “This has been tried—and it failed,” Peter said. “For the last four years, more first-time buyer leverage in a seller’s market has gotten capitalized into higher house prices, thus crimping affordability.” So, what’s the solution? Adding more supply, he says. “Especially at the lower end of the housing market,” Peter said, “where most first-time buyers are buying.”