Rob Chrane: Are We Undercounting First-Time Homebuyers? Why Counting Methodology Matters

Rob Chrane is the founder and CEO of Down Payment Resource, the housing industry’s leading technology for connecting homebuyers with more than 2,400 homebuyer assistance programs nationwide.

First-time homebuyers are the foundation of a lender’s long-term success, writes Down Payment Resource’s Rob Chrane. A positive mortgage experience today can lead to future refinances, upsizing or downsizing, and referrals that fuel new business. But how many first-time buyers are actually entering the market? And are lenders misjudging their presence based on the data they rely on?

Recent datasets reveal wildly different estimates of FTHB activity — raising important questions about how these buyers are counted, and whether lenders are allocating enough resources to capture this vital audience.

Conflicting Data on First-Time Buyers

The number of first-time homebuyers in the market varies significantly depending on the source. Several key reports provide insights into FTHB activity, but they rely on different methodologies, which can yield widely different results.

The National Association of Realtors (NAR) provides FTHB statistics in its annual Profile of Home Buyers and Sellers. NAR gathers first-time buyer data by surveying a random sample of recent home buyers, weighted by geographic distribution of sales, about their prior homeownership status. In July 2024, NAR mailed its 127-question survey to 167,750 recent homebuyers, and it received 5,390 responses — a 3.2% response rate when accounting for undeliverable questionnaires. This year’s survey found the percentage of FTHBs hitting a historic low of 24% (down from 32% last year).

Intercontinental Exchange (ICE) gives us a different view. Using data from its eMBS agency securities database, ICE reports that FTHBs made up 47% of all agency purchase mortgages in 2023 and that FTHB purchase loans accounted for an exceptionally high share of all issuance activity, making up 39% of all GSE securitizations in 2023 — 12% higher than any other vintage in the past decade.

The FHA, the most popular government-backed program, tracks the number of FTHBs assisted by its programs via loan applications submitted by lenders. In these calculations, the FHA considers an individual an FTHB if he or she has not owned a primary residence within the past three years. If either spouse meets this criteria, the couple is considered a FTHB. In its 2024 annual report, the FHA reports serving more than 498,000 first-time homebuyers in 2023, totaling more than 82% of its mortgage purchase volume.

The Urban Institute (UI), a non-profit research organization based in Washington D.C., provides a comprehensive estimate of FTHBs by combining data from the Federal Housing Administration (FHA) and the Federal Housing Finance Agency (FHFA) to calculate the share of first-time homebuyers. UI reports that in October 2023, the FTHB share of FHA lending was 82%, and in September 2023, the GSE share of lending was 50.8%, and the VA share was 49.9%.

Notably, the FTHB figures from ICE, FHA and UI are significantly higher than NAR’s finding of 24%.

These discrepancies illustrate the challenge in defining and quantifying FTHB activity. NAR’s data, which is widely cited in industry reports, is based on self-reported surveys with a relatively low response rate (just 3.2% of the 167,750 buyers surveyed). In contrast, ICE, FHA, and UI rely on actual loan data, which is likely to offer a more comprehensive picture.

Why This Matters in a Changing Market

A housing market buffeted by high interest rates and rising home prices presents unique challenges for FTHBs. But that doesn’t mean people will stop buying homes. Redfin predicts the number of homes sold in 2025 will be between 4.1 million and 4.4 million, a 2–9% increase from 2024.

With a high percentage of those buyers most likely being FTHBs, lenders will need to use every tool in their arsenal to educate and assist them toward sustainable homeownership, including partnering with local real estate agents, targeted online marketing campaigns, educational resources, and FTHB-specific loan and down payment assistance programs.

DPA: A Strategy to Better Serve FTHBs

Lenders that prioritize first-time buyers can position themselves for long-term success by implementing targeted strategies, like support for down payment assistance (DPA) programs. DPA is an essential tool in helping more people achieve homeownership as it reduces one of their biggest obstacles – having enough saved for a down payment. A 2023 joint Down Payment Resource and UI study found that 36.7% of denied mortgages were declined because of a high debt-to-income (DTI) ratio, and another 5.7% were declined because of insufficient cash-to-close. For low- to moderate-income borrowers, 46% were declined because of an excessively high DTI ratio, and 5% were declined because of insufficient cash-to-close. DPA would have allowed borrowers who were declined for insufficient cash-to-close to have received a mortgage, as well as some (but not all) who were declined because of their DTI ratio.

The fact is DPA can lower a homebuyer’s loan-to-value (LTV) by an average of 6%. That difference could salvage a lot of business.

Strategies to Better Serve First-Time Buyers

Lenders relying on publicly available datasets – whichever you prefer to use – should keep in mind the methodology and its intent. A NAR dataset, for example, is used to provide insights to its members, real estate brokers and agents, partners and the real estate industry, but not necessarily lenders. Keep this in mind when strategizing how you allocate resources to reach FTHB in your market.

Whether one favors NAR’s 24% finding of FTHB in the market or one of the higher percentages forwarded by sources like FHA and UI, I think there will be a significant number of first-time home shoppers this spring. I would encourage mortgage lenders to be creative in reaching out to them and sensitive to how special programs and down payment assistance can help them achieve their American Dream sooner rather than later so they can begin reaping the rewards of building equity through homeownership.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)