First-Time Buyers Took Out Record Number Of GSE Loans In 2023

First-time homebuyers accounted for a record number of GSE purchase loans in 2023, while originations sunk to new lows, according to ICE’s latest Mortgage Monitor.

They made up 55% of agency purchases last year, the highest share ever recorded by ICE in the ten years it has been tracking this metric.

“The market in which these folks purchased their first home was one of record house prices, ballooning down payments, rising rates, and elevated DTIs,” Andy Walden, ICE Vice President of Enterprise Research Strategy, said.

“Given record exposure to first-time homebuyer loans, it’ll be worth watching the performance of this cohort very closely moving forward, particularly for those invested in 2023 agency MBS.”

First-timers and repeat buyers differed greatly in their debt-to-income ratios for all products, but for conventional mortgages especially. These buyers’ front-end DTI stood at 31.2%, 4 points higher than returning buyers.

Their back-end DTIs were more similar, however. First-time buyers who spend a greater portion of their income on housing spend less on their other debts, ICE said.

Millennials, the biggest cohort of homebuyers, have faced a tough housing market since they first began aging into their prime purchasing years. Though they face difficult headwinds, they have pushed forward to homeownership as life changes such as marriage and children force them to make due in an unwelcoming market.

LendingTree reports that across the country’s 50 largest metros, more than half of all mortgages offered in 2023 went to Millennials, in line with ICE’s findings.

At the same time, only 4.3 million mortgages were originated in 2023, the lowest number in 30 years of data.

“Since 1995, only two quarters have seen fewer than 1 million first lien mortgages originated. The first was Q1 2023, and Q4 the second. Looking back, last year’s market was dominated by purchase lending, with loans to buy homes making up 82% of a historically low number of originations,” Walden said.

Refinances continued to fare poorly, though rate-term refinances surged to 24% of activity in January as rates held steady in the mid-6s.

Walden noted that “providing an exemplary servicing experience,” is critical to boosting refi activity, alongside expert communication with homeowners and enhanced customer experience.

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