CALCULATEDRISK
By Bill McBride
Press Release: ICE Mortgage Monitor: First-Time Homebuyers Comprise Record Share of Agency Purchase Lending in Q1 2025
Intercontinental Exchange, Inc. recently released its May 2025 Mortgage Monitor Report, which delves into the rising share of first-time and Gen Z homebuyer participation in the mortgage market. Notably, first-time homebuyers (FTHBs) accounted for a record share of agency purchase lending in Q1 2025 as higher interest rates continued to dampen repeat buyer participation in the market. At the same time, Gen Z buyers made substantial gains in more affordable states, while FHA loans regained popularity as a critical tool for affordability-minded homebuyers.
“While first-time homebuyers continue to face affordability headwinds, they don’t have the same disincentive to transact as many repeat buyers, who remain locked in the golden handcuffs of relatively low monthly payments on their existing homes,” said Andy Walden, Head of Mortgage and Housing Market Research for ICE. “Younger homebuyers are picking up market share with lenders this spring, with people age 35 and under accounting for more than half of financed home purchases by first-time buyers in Q1.”
Highlights from the May 2025 Mortgage Monitor include:
- First-time homebuyers are driving a record share of agency purchase lendingFTHBs made up 58% of such purchase lending in Q1 2025 – the highest share on record. Notably, while repeat-buyer activity has softened markedly from pre-pandemic levels – with originations among this group down 31% compared to 2018 and 2019 – FTHB volume has seen less compression, declining only 19%. In fact, purchase lending overall has made up a larger share of issuance in recent years, with purchase loans accounting for a record 82% of agency lending in 2023, more than 75% last year, and nearly three-quarters in Q1 2025
- Gen Z accounts for one in four loans issued to first-time homebuyersYounger buyers are also starting to reshape the homeownership landscape. Gen Z, the oldest of whom are 28, accounted for roughly one in four FTHB mortgage originations in Q1 2025. Gen Z participation is higher in lower-cost markets, with Indiana, South Dakota, and Kentucky seeing Gen Z shares top 30% of FTHB activity. However, affordability challenges continue to constrain Gen Z participation in higher-priced coastal markets. D.C. has the lowest share of Gen Z buyers, with a mere 7% of all purchase mortgages and 11% among FTHBs. California is close behind, with Gen Z comprising 8% of purchase and 13% of FTHB loans.
- First-time home buyer down payments lag repeat buyers by $80KWith the housing market softening and affordability still a challenge, FTHBs moved increasingly towards FHA loans, which have lower down-payment requirements. ICE Origination Data shows that the average FTHB in March put $49K down on their home purchase, well below the $134K average among repeat buyers. While the average FTHB using a conventional conforming prime loan typical of GSE securitizations provided a $77K down payment, FTHBs financing with FHA loans put down significantly less ($16K). FTHBs who qualified for VA mortgages had even lower average down payments of just under $10K.
- eMBS performance trends show first-time homebuyers had slower prepayments but higher defaultsWhile performance can vary significantly by cohort, ICE eMBS data reveals two trends that are notable given increased exposure to FTHB purchase loans in recent vintages. For one, prepayment speeds among loans to FTHBs tend to run noticeably slower than loans to repeat buyers. Also, FTHBs tend to be more prone to default, though this trend can vary significantly across vintages, cohorts and investor classes.“With first-time homebuyers making up an elevated share of purchase originations and Gen Z beginning to emerge in the market, lenders have a powerful opportunity to meet this digitally native generation by offering intuitive digital tools such as online applications, self-service portals, and document upload capabilities,” said Andy Walden. “At the same time, capital markets participants should closely monitor how this shift may influence loan performance and portfolio behavior as these buyers gain a stronger foothold in the housing market.”emphasis added
Mortgage Delinquencies Decreased in March
Here is a graph of the national delinquency rate from ICE. Overall delinquencies decreased in March and are below the pre-pandemic levels. Source: ICE McDash
- The national delinquency rate dropped -32 basis points (bps) to 3.21% in March – the lowest since May 2024 – up a modest 0.4% (1 bp) from the same month a year ago (which was higher than typical due to a Sunday month-end) and only 29 bps above the 2.92% record low set in March 2023
- The MoM improvement in delinquencies, at -8.9%, fell slightly short of the typical seasonal average of -10.4%
- While delinquencies overall remain well below pre-pandemic levels, serious delinquencies (SDQ) continue to tick modestly higher, rising by 14% (+60K) since March 2024, with the rise almost entirely attributable to FHA loans
- Effects of disaster events have pushed delinquency rates up YoY in many states, including Florida (+44 bps), South Carolina (+17 bps), Georgia (+14 bps) and California (+10 bps)
Active Foreclosures Increase but Remain Low
Active foreclosures increased – mostly due to the pickup following the end of the VA foreclosure moratorium. This is still below pre-pandemic levels.
- Foreclosure activity is slowly beginning to tick higher, with 213K loans in active foreclosure at the end of Q1 2025 ‒ up 4% from the same time last year ‒ marking the first annual increase in nearly two years
- VA loans in active foreclosure are up 54% from last year, following the expiration of a year-long foreclosure moratorium; FHA loans in foreclosure are up 11% for the same period
- Foreclosure starts, overall, are up 28% from last March, primarily attributable to the return of VA activity, although both conventional (+12%) and FHA (+5%) foreclosure starts were also modestly higher YoY
- Foreclosure sales continue to run at historically low levels, although March volumes were up 4% from the same time last year marking the first annual rise in more than a year ‒ due to the resumption of VA foreclosure activity
House Price Growth Continues to Slow
Here is the year-over-year in house prices according to the ICE Home Price Index (HPI). The ICE HPI is a repeat sales index. ICE reports the median price change of the repeat sales. The index was up 2.4% year-over-year in March, down from 3.5% YoY in February. The early look at the April HPI shows a 1.9% YoY increase.
- Improved inventory levels are providing more options and a softer price dynamic for homeowners shopping this spring
- Annual home price growth cooled to a revised +2.4% in March from +3.5% at the start of the year, with an early look at April data via ICE’s enhanced Home Price Index suggesting price growth has cooled further to +1.9% which would mark the slowest growth rate in nearly two years
- Early April data also shows home prices rose by a modest 0.1% in the month on a seasonally adjusted basis, which would mark the softest single month growth since late 2023 when mortgage rates had climbed above 7.5%
- If recent seasonally adjusted gains persist, the annual home price growth rate would cool further in Q2
- Single family prices were up by +2.1% from the same time last year, with condos down -0.4%, marking the first such annual decline since 2012
- All in, nearly half of major markets are seeing condo prices down from last years levels, with the largest declines in Florida, especially in areas heavily impacted by last year’s hurricanes
Here is the ICE April Mortgage Monitor report (pdf).