themortgagellm^™

Written by The Mortgage LLM Team—a group of industry analysts leveraging our proprietary mortgage-domain language models to synthesize and decode housing data.

📌 FTHB distribution: quick takeaways by role

• Regional sales managers & originators: The market share of first-time buyers is lying to you. A high FTHB share in California means move-up buyers fled to jumbo; a high share in Wisconsin means slow demographic turnover. Pivot your agent pitch to your local market signature. Jump to origination strategy.
• Credit risk & product executives: FHA purchase originations hit an unprecedented 81.0% FTHB concentration in 2025. The high-leverage segment (95%+ LTV) is clustered in a handful of growth Sun Belt states, creating hyper-localized geographic risk. Jump to product risk.
• Capital markets & underwriting directors: Conforming-limit truncation operates as a hard ceiling in high-cost counties, pushing the upper tail of purchase business out of the agency book and into jumbo, private-label, and bank balance sheets. Jump to capital-markets implications.

The conventional read of the first-time-homebuyer market follows the buyer-migration map: where people are moving, that is where the starters cluster. Texas, Florida, the growth Sun Belt. The agency loan-level data inverts the picture. On Fannie Mae and Freddie Mac conforming purchase originations in 2024 and 2025, first-time buyers were the largest share of the active purchaser pool in the coastal high-cost states — DC at 68%, New York 64%, Connecticut 63%, New Jersey 61%, Massachusetts 60%, California 59% — and the smallest share across the lower-cost interior and the growth Sun Belt — South Carolina 37%, Alabama and Mississippi 39%, Idaho, Arkansas, Oklahoma, and Tennessee 39–40%, Florida 42%, Arizona 42%, Nevada 45%. The spread between the top of the FTHB ranking and the bottom was 31 percentage points, and it cut the country in a direction the popular framing does not.

The map, before the mechanism

Three blocs lined up in the ranking. The top was the coastal high-cost cluster already named. The middle was a Midwest band — Illinois, Wisconsin, Pennsylvania, Minnesota, Ohio, Michigan, Indiana — affordable, slow-growth, in the mid-to-high 50s on FTHB share. The bottom mixed two different kinds of states — the affordability-favored lower-cost interior and the fast-growth Sun Belt — sitting side by side under the same line.

The geography is paradoxical: where first-time buyers most struggled to afford the entry, they were the largest share of conforming purchases; where buyer migration was heaviest, they were among the smallest. The pattern wants a mechanism — and there is at least one clean one, though it carries only part of the load.

The ceiling, where it operates

For the coastal cluster, the explanation is the conforming-loan-limit ceiling. Fannie and Freddie can only buy loans below a county-level dollar cap that the FHFA resets annually — $766,550 in standard counties for 2024, rising to $806,500 for 2025, with the high-cost-area ceiling running up to $1,149,825 in 2024 and $1,209,750 in 2025 in the most expensive counties. Loans above that cap are jumbo and fall out of the agency book entirely. Our analysis applies each loan’s vintage-year limit, not a blended baseline — so a 2024 California origination is measured against the 2024 cap and a 2025 origination against the 2025 cap.

In the coastal HCOL states, that ceiling is binding. New York’s median single-family price is well past the limit in Manhattan and well past it across coastal Connecticut; California’s is past the limit through the Bay Area and metro Los Angeles. A typical first-time buyer there is purchasing a starter property below the limit; a move-up buyer trading up to a $1.4 million home is not — they exit conforming and become a jumbo borrower. The result, mechanically, is that the conforming purchase data in those states is depleted of move-up buyers. First-time buyers stay; repeat buyers leave; first-time-buyer share rises.

The data carries the fingerprint. In California, the 90th-percentile conforming purchase loan size in 2024–25 ran 104% of the state’s modal county conforming limit; in DC, 107%; in Massachusetts, 93%; in New Jersey, 90%; in Washington, 97%; in New York, 89%. The upper tail of the conforming book in those states was sitting against the ceiling — exactly what truncation looks like. HMDA’s state jumbo share — the share of purchase originations crossing into jumbo — ran 11.4% in California, 8.8% in DC, 7.8% in Hawaii, 6.2% in Washington, 5.6% in Connecticut, 4.9% in Massachusetts, against 0.4% in Iowa, 0.6% in West Virginia, 0.9% in Mississippi. The move-up buyers in the coastal cluster went somewhere, and the data shows them going into jumbo — where they leave our agency view.

Figure: Conforming-conventional FTHB share against HMDA jumbo share, 48 states. The coastal cluster (top-right) carries the conforming-ceiling mechanism cleanly; the Midwest band (top-left, high FTHB share without jumbo exodus) and the growth Sun Belt (bottom) sit on different forces. Interactive version — hover any state for FTHB share, jumbo share, the truncation ratio, and the assigned mechanism flavor.

But the ceiling is not the universal driver. Across the 48 states in the synthesis, state FTHB share correlates with HMDA jumbo share at r = 0.46 and with the truncation ratio at r = 0.36. That is a moderate relationship, not a strong one — roughly a fifth of the cross-state variance, not most of it. The ceiling story carries the coastal cluster cleanly. It does not carry the rest of the map.

What the ceiling doesn’t explain

Two other forces show up in the residual.

The Midwest baseline. Wisconsin sat at 57% FTHB share — top quartile nationally — with a 90th-percentile conforming loan at 56% of the state’s conforming limit (nowhere near it) and a jumbo share of 1.3% (nowhere near elevated). Pennsylvania, Minnesota, Illinois, Ohio, Michigan, and Indiana all showed the same signature: high FTHB share, no jumbo exodus, no ceiling truncation. The mechanism here is demographic, not selection. Population growth across the upper Midwest is slow, housing turnover is low, and move-up trades within the conforming envelope happen at modest pace. With fewer repeat-buyer transactions in the denominator, first-time buyers become a larger share of the turnover that does occur — and the agency book reflects that.

The growth Sun Belt. Florida, Arizona, Nevada, and Montana sat toward the bottom of the FTHB ranking despite being affordability-favored and growth-positive. The likely mechanism here is the inverse of the Midwest one: heavy in-migration of equity-rich repeat buyers from the coastal HCOL states inflates the non-FTHB denominator. A retiree selling in San Francisco and buying in Phoenix is, in the agency data, a non-FTHB purchase that would not have existed in Phoenix five years ago. The Sun Belt’s growth story shows up as a dilution of FTHB share, not a concentration.

We can name both mechanisms with plausibility — each is well-documented externally — but loan-level data alone does not prove them. The honest disclosure: roughly four-fifths of the cross-state FTHB-share variance lives outside the ceiling explanation, and at least two named forces operate in that residual. The inversion is a multi-driver phenomenon. The ceiling cleanly carries the coastal cluster; other forces carry the rest.

The FHA leg: a different FTHB market, in different states

Conventional conforming is one program tier. FHA is another, and its FTHB story is sharper and concentrated in different states.

FHA crossed 80% FTHB capture for the first time on record in 2024 (80.0%) and reached 81.0% in 2025 — the highest FTHB concentration on FHA purchase originations since loan-level disclosure began. FHA was, more than ever before, the first-time-buyer’s program.

Where its high-leverage tier — 95%+ LTV purchases — clustered was the opposite of the conforming-FTHB map. In 2024–25 vintages, the 95%+ LTV FHA purchase count concentrated in Texas (172,000 loans), Florida (115,000), California (71,000), Georgia (48,000), and Arizona (40,000) — the same growth Sun Belt that sat at the bottom of the conforming FTHB ranking.

California is the sharpest illustration. It sat in the top six on conforming FTHB share (58.9%) — a high-income FTHB pool entering the conforming book under the ceiling — and in the top three on the FHA 95%+ LTV cluster. Same state, two different FTHB markets, served by two different program tiers. The popular notion of “the California FTHB” actually points at two different borrowers, and the program tier is where the difference shows up.

Operational takeaways: pitches, pools, and geographic realities

The inversion lands differently on each desk it touches. Three reads, by role.

💼 For sales managers & top-producing LOs: the localized referral pitch

Stop using a uniform national script for first-time-buyer programs. In New York or California, you are operating in a conventional book depleted of move-up buyers, and your agent pitch should center on jumbo-conforming bridging, high-balance loan structures, and DPA for higher-income earners squeezed against the conforming cap. In the Sun Belt, your conforming book is diluted by equity-rich repeat-buyer inflows from coastal markets — your pathway to volume runs through builder-incentive architectures, FHA credit layering, and 95%+ LTV programs that capture the entry-level buyer being priced behind that cash migration. In the Midwest, neither force is strong — your FTHB density is a function of slow turnover, and your edge is local agent depth, not program complexity.

⚙️ For credit risk & product executives: the FHA concentration hazard

FHA is no longer a broad-line risk aggregator; it has become a specialized high-leverage vehicle for first-time buyers, operating at an 81% FTHB concentration as of 2025. More consequentially, the risk is concentrated geographically. The 95%+ LTV FHA purchase volume is structurally isolated within Texas, Florida, Georgia, and Arizona — markets where new construction has substituted for frozen existing-home inventory and where appraisal and inventory dynamics move together. These cohorts have effectively zero equity cushion to absorb a home-price correction; underwriting and risk leaders should monitor these specific Sun Belt metros for pockets of overbuilt inventory and softening valuations rather than reading FHA as a single national book.

📊 For capital markets & secondary desks: the truncation read

The clear truncation signature at the 90th percentile of conforming purchases in coastal states shows the agency pipeline hitting a policy-driven barrier in those markets, not a behavior change. For secondary desks, that creates an operational divergence: the prime-credit move-up paper that historically balanced out high-LTV agency pools in high-cost areas is exiting the agency book into jumbo, private-label, and bank balance sheets. Desks running agency-only execution in the coastal cluster should consider how aggressively to nurture private-label securitization (PLS) or bank-portfolio partnerships to capture the move-up segment the conforming caps are routing past them.

The map was a real, durable, measurable feature of the agency and government purchase market in 2025. The conforming-ceiling mechanism explains the coastal cluster cleanly and roughly a fifth of the national variance. Two other forces — Midwest demographic stability and Sun Belt in-migration — operate in the rest of the residual; we can name them honestly but cannot, with this data alone, attribute them precisely. The next HMDA refresh, in March 2027, will let us hold those mechanisms to account. Until then, the inversion is the pattern to read — and the question to put to anyone calling 2025 a single FTHB market is which one?

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Methodology. Conforming-conventional data sourced from Fannie Mae Single-Family Performance Data and Freddie Mac STACR reference pools; government-program data from Ginnie Mae’s loan-level monthly disclosure (FHA and VA). State-level jumbo share computed from HMDA Snapshot LAR via the Federal Financial Institutions Examination Council. All consolidated via The Mortgage LLM’s analytics instance. Cohort: 2024 and 2025 purchase originations, owner-occupied principal residences only, one row per loan (acquisition snapshot). First-time-homebuyer status is the GSE/Ginnie acquisition-time flag, self-attested by the seller at acquisition; the unreported share is excluded from the FTHB-share denominator rather than imputed, and a coverage check confirmed the flag is well populated across years with modest channel-level reporting variance. Conforming-limit ceiling test: state 90th-percentile conforming purchase UPB compared against the state’s modal county one-unit conforming limit for the loan’s vintage year (FHFA baseline of $766,550 for 2024 and $806,500 for 2025, with high-cost-area limits to $1,149,825 and $1,209,750 respectively). Every loan is measured against the limit in effect at its own origination year; no blended baseline is applied across the two-vintage window. State jumbo share defined analogously — the share of state purchase originations whose loan amount exceeds the loan’s county-and-year-specific conforming limit, matching the jumbo definition used in our HHI piece. A separate denominator-effect check confirmed that 2021–2024 purchase originations fell sharply for both first-time and repeat buyers under the rate shock — FTHB count from roughly 1.20 million to 585 thousand, non-FTHB count from 1.43 million to 577 thousand — with FTHB share drifting 45.7% to 50.3% over the same window; the piece reads the 2024–25 cross-state inversion as the durable feature, not the rate-shock decline. Out of scope: jumbo, bank-portfolio, non-QM, private-label, and investor or second-home purchases. Informational, not advice.