ICE reported that purchase mortgages have made up a larger share of overall issuance in recent years. They accounted for a record 82% of agency lending in 2023, more than 75% in 2024 and nearly three-quarters in Q1 2025.
Similarly, the report found that Generation Z buyers made substantial gains in more affordable states. Gen Z was responsible for one in four loans issued to first-time homebuyers.
And despite tightened affordability, first-time buyer purchase lending has held up better than activity among repeat buyers compared to 2018 and 2019 — especially for conventional loans through the government-sponsored enterprises (GSEs).
“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, ICE’s head of mortgage and housing market research.
“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.”
Gen Z participation is higher in lower-cost markets as market affordability challenges price them out of coastal areas. Indiana, South Dakota and Kentucky are seeing Gen Z shares top 30% of first-time buyer activity.
Washington, D.C., has the smallest share of Gen Z homebuyers at 7% of all purchase mortgages and 11% of first-time buyer loans. California follows closely behind, with Gen Z making up 8% of purchase mortgage and 13% of first-time buyer loans.
As the housing market has softened and down payments remain a hurdle, first-time buyers have increasingly turned to Federal Housing Administration (FHA) loans. In March, the average first-time buyer put down $49,000 — far below the $134,000 average for repeat buyers.
Among first-time buyers, those using conventional loans had an average down payment of $77,000, while FHA borrowers put down only $16,000 and U.S. Department of Veterans Affairs (VA) borrowers were even less at about $10,000.
“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,” Walden said.
“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.”
Mortgage performance update
Monday’s release offered a first look into early 2025 mortgage performance. ICE reported that delinquency rates remain near historic lows but are trending higher year over year, propelled almost entirely by FHA loans. ICE said that Southern states lead for delinquency rates of at least 90 days.
The national delinquency rate dropped by 32 basis points (bps) to 3.21% in March — the lowest figure since May 2024 and only 29 bps above the record low of 2.92% set in March 2023.
Foreclosure activity is edging up, with 213,000 loans in active foreclosure at the end of Q1 2025— a 4% rise from a year ago and the first annualized increase in nearly two years.
VA foreclosures surged 54% after a moratorium ended, while FHA foreclosures rose 11%. Foreclosure starts climbed 28% year over year, driven largely by VA loans, although conventional (+12%) and FHA (+5%) starts also increased.
Foreclosure sales remain historically low but were up 4% in March, marking the first annualized increase in more than a year due to renewed VA activity.
Housing market update
After starting 2025 softer, mortgage applications have been up year over year in each of the past 13 weeks through April 25, according to ICE. Purchase applications, which spiked in the immediate aftermath of reciprocal tariff announcements in early April, have softened alongside rate increases.
The company observed higher inventory volumes during March, with the deficit of homes for sale compared with pre-pandemic averages (2017-2019) falling by 20%. New listings were up 10% year over year in March, falling only 12% shy of their 2017-2019 averages.
Nearly one-third of major markets are back to pre-pandemic inventory levels. The largest surpluses are in Lakeland, Florida; Denver; and Colorado Springs, which have about 75% more homes for sale than they averaged during the spring homebuying seasons of 2017-2019.
Conversely, the steepest shortages are in the Northeast. A handful of major markets there, including Hartford, Connecticut; New Haven, Connecticut; Albany, New York; and Rochester, New York, still running 20% to 30% below normal.