As I noted earlier, household formation has been particularly weak among young individuals, who are also a large part of the potential first-time homebuyer population. Many of these young individuals have relatively weak credit records and are more likely to have had a recent spell of unemployment. Our staff analysis highlights how tight credit conditions are for such individuals in the current environment.
In the early 2000s, about one-third of first-time homebuyers under the age of 40 had credit scores below 620, and another one-fourth had scores between 620 and 680. Today, many of these individuals would have a difficult time obtaining mortgage credit. Why is mortgage credit so tight?