Home-purchase demand started strong for both first-time homebuyers and repeat homebuyers in January and February of 2020, supported by a lower mortgage rate and unemployment rate than one year earlier. As the novel coronavirus (aka COVID-19) spread in the U.S., we have begun to see its impact on decisions to buy homes. To observe how COVID-19 may have affected home purchases by first-time and repeat buyers, we used CoreLogic Loan Application data for January through May2nd, 2020 and compared this year’s activity with 2019.
Figure 1 shows year-over-year percent change in the number of home-purchase loan applications by first-time homebuyers and repeat homebuyers relative to the same month of the prior year, using loan applications through ending May2nd, 2020. Summed across all type of homebuyers, loan applications in April 2020 fell 19% from one-year ago. Home-purchase applications submitted by the first-time homebuyers fell 7% in April compared to the same month of the prior year and applications submitted by repeat homebuyers plunged by 26%.
Home-purchase loan applications picked up after the second week of January 2020 for both types of homebuyers, with the highest surge for first-time homebuyers (Figure 2). The increase in demand in early 2020 was supported by a robust economy, a lower mortgage rate than one year earlier, and a rising desire for first-time homeownership. The rise in first-time buyer purchases helped to raise the homeownership rate in the first quarter to 65.3%, the highest since 2013. However, activity started to slow during the second week of February and was running below the pace of 2019 for repeat homebuyers. As of the week ending May 2nd, home-purchase loan applications made by the first-time homebuyers for 2020 were 6% less than the same week in 2019 compared to a drop of 29% for repeat homebuyers.
Not only the impact by COVID-19 differed between the first-time homebuyers and repeat buyers, there are notable differences between these two types of borrowers in loan characteristics and credit characteristics. Often, first-time homebuyers have less credit history, limited or no savings, and lower levels of income because they are just beginning their working careers. In contrast, repeat buyers generally have an extensive credit history, more savings, and higher levels of income as they have work experience and established careers. Table 1 compares borrower attributes and loan attributes for first-time homebuyers and repeat homebuyers based on home-purchase applications for April 2020 and April 2019.
As shown in the table, average credit score went up for both first-time homebuyers and repeat buyers in April 2020 from one-year ago. However, the average credit score was lower for first-time homebuyers, as they have had less time to build their credit history and have smaller amounts of savings to offset fluctuations in earnings. First-time home buyers were more likely to be young; the average age of first-time home buyers was 33 in April 2020 compared to 41 for repeat homebuyers.
The table also reports the differences between these two types of borrowers in loan-to-value ratios (LTV) and debt-to-income ratios (DTI), loan amounts, mortgage rates and monthly payments.
Mortgage interest rate dropped down by about one point for both first-time homebuyers and repeat homebuyers from one-year ago. Thus, even though the loan amount had gone up, the monthly payment dropped for both first-time homebuyers and repeat homebuyers.
With higher credit scores, lower DTIs and LTVs, repeat homebuyers relished lower mortgage rates than their first-time homebuyer counterparts.
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 Only first-lien, owner-occupied home-purchase applications were used for this study from the CoreLogic Loan Application Database.
 See https://www.census.gov/housing/hvs/files/currenthvspress.pdf