A new study anticipates millions of consumers will become first-time homebuyers in the next few years, presenting credit unions with an opportunity to continue to meet consumers' needs.
Approximately 17 million first-time homebuyers are expected to enter the housing market in the next five years, with nearly three million expected in 2017, according to a new TransUnion study.
Younger consumers—ages 20 to 39—represent an increasing majority of first-time homebuyers.
During the fourth quarter of 2015, this age group represented 60% of first-time homebuyers. That percentage has been slowing increasing since the fourth quarter of 2000 (44%).
“First-time homebuyers are valuable prospects in the eyes of many mortgage lenders, as that time in a borrower’s life often corresponds to additional financial needs,” says Joe Mellman, vice president and mortgage line of business leader at TransUnion. “It is evident from trended data that first-time homebuyers show distinct credit characteristics that distinguish them from non-buyers.”
These borrowers often have higher credit scores than nonbuyers, are more credit active, and exhibit more credit responsible behavior, Mellman says.
TransUnion partnered with AnswerMine, a machine-learning model development firm, to develop the “First-Time Homebuyers Propensity Model,” which identifies consumers who are likely to become first-time homebuyers.
The model estimates there could be 13.8 to 17.1 million first-time homebuyers entering the housing market over the next five years. The projection is based on consumers who don’t currently have a mortgage.
That’s a significant addition to the mortgage pool. In 2015, 6.2 million consumers opened a new mortgage.
Of those, approximately half—or three million—were first-time homebuyers.
“It’s clear that there should be many new homebuyers in the market in the next few years,” says Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit. “Our hope is that, with the use of trended data, mortgage lenders can better serve these consumers. We anticipate the benefits of trended data will continue to expand to other lenders, as we believe this is the future of credit scoring.”