Mortgage News

News

TransUnion forecasts first-time buyer growth, low delinquencies in 2020

U.S. consumers are expected to keep up a strong pattern of credit activity on 2020, including mortgage loans.

That’s according to TransUnion’s 2020 Consumer Credit Forecast, with the credit reporting agency anticipating that next year could see more first-time buyers getting into the fray.

“What we are expecting from our forecasts for next year is that, while home prices are expected to go up, [they are expected] to go up at a decreasing rate,” said Matt Komos, vice president of research and consulting for TransUnion’s financial services business unit. “What that means is that there will be new opportunities for some segments of the population.”

Those segments, Komos continued, include buyers looking to get into the entry-level tiers of the marketplace. While TransUnion expects overall originations to drop relative to 2019, Komos said that the company anticipates first-time buyers to hit the market in a big way to help offset the growth decline.

That could mean major opportunities for brokers and lenders who adjust their approaches to cater to such borrowers.

“Consumer expectations are continuing to evolve,” Komos said. “I do think there are opportunities on the lending side. There is an opportunity to improve the experience, and that’s what [first-time buyers] are going to respond to and that’s what will drive the industry forward. … There are opportunities for lenders to expand their buybacks and ways to attract that first-time homebuyer through products and expectations that can be met.”

Komos went on to say that many in the consumer credit industry — including the mortgage sphere —have been diligent in learning from techniques and technologies used by fintechs in the unsecured personal loan market. Knowledge and tech borrowed from that industry could soon permeate other asset classes and products, including mortgages, even as soon as 2020.

As far as credit performance, TransUnion experts said that as the mortgage product still tends to be a “prime and above” product since the recession. The share of non-prime borrower originations in mortgages, just as in other credit products, is expected to remain relatively steady, and much lower than what was seen in the throes of the downturn a decade ago. For 2020, TransUnion expects the share of non-prime mortgage originations at 19%, a slight increase from the 17% seen during 2018 and projected for 2019. Still, that percentage remains well below the 28% share seen during the start of the recession in 2007.

“As such, we have recently seen historical lows in regard to delinquency,” said Joe Mellman, TransUnion’s senior vice president and mortgage line of business leader. “The serious delinquency rate in 2020 is expected to follow this trend and remain under 1.5%.”

As for the credit market as a whole, the expectation remains one of sustained strength, with both balance and origination activity projected to grow for most key non-mortgage credit products next year.

“The U.S. consumer is as strong as ever, and TransUnion expects more of the same in 2020,” Komos said. “More consumers are securing loans and increasing their balances in a measured manner, all while maintaining historically low delinquency levels. Low unemployment rates, continued wage growth and an overall sound economy are making this positive performance hold true. As it’s anticipated that these positive economic trends will continue in 2020, TransUnion expects the healthy consumer credit market to continue in 2020 as well.”

One credit product where tangible growth is expected among non-prime segments is in credit cards, although TransUnion doesn’t predict delinquency to suffer as a result.

“Originations in the credit card market are expected to slow in 2020, with the majority of growth coming from the non-prime risk tiers,” said Paul Siegfried, senior vice president and credit card line of business lead at TransUnion. “However, this increase in non-prime activity is not expected to impact card performance as our projections have the delinquency rate staying under 2% – well below post-recessionary levels. We anticipate that the credit card market will be well-positioned from both a performance and growth standpoint as card issuers balance risk across their portfolios.”

Author

More Headlines