Challenging the 'Myth' of Millennial Homeownership
Mike Sorohan firstname.lastname@example.org
Despite growing evidence to the contrary, perceptions persist that Millennials are destined to be a generation of renters.
Earlier this month, Ellie Mae, Pleasanton, Calif., reported 83 percent of mortgage loans made to Millennial borrowers in February involved new home purchases, up by two percentage points from January, in spite of rising interest rates. The company's Millennial Tracker said Millennial purchase loans have been trending up compared to all closed purchase loans, now representing 45 percent of total closed purchase loans compared to 43 percent in December. By comparison, non-Millennial purchase loans have declined from 57 percent of total closed purchase loans in December to 55 percent in February.
"Millennials are now officially the largest group of homebuyers in the U.S.," said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. "Despite rising interest rates, we're continuing to see Millennials exercise their purchase power across the United States."
First American Financial Corp., Santa Ana, Calif., also weighed in on the Millennial "myth." Chief Economist Mark Fleming noted with student loan debt burdens, the scars of the Great Recession and limited housing supply, the myth is rooted in some real challenges for millennials.
"However, despite these challenges, Millennials are not only interested in homeownership, they are the primary reason that the homeownership rate increased over the past year," Fleming said in a recent blog.
Okay, so maybe Millennials aren't buying million-dollar properties in hot markets such as San Francisco, New York or Seattle. But they are buying homes. Ellie Mae reported hottest housing markets for Millennials continued to be in the Midwest. The top markets by percentage of Millennial loans closed included Casper, Wyo. (68 percent), Austin, Minn. (62 percent) and Fairmont, W.Va. (61 percent).
First American reported hot Millennial markets such as Birmingham, Ala.; Virginia Beach, Va.; Pittsburgh; Buffalo; and Minneapolis. In the top market, Birmingham, the Millennial homeownership share increased from 11.9 percent in 2016 to 18.0 percent in 2017. The top five markets experienced an average Millennial homeownership share increase of 5.4 percent.
"Many millennials have prioritized furthering their education and thus delayed getting married and having children, which are critical lifestyle triggers to buying a first home," Fleming said. "However, now the oldest millennials have made those lifestyle decisions and are entering the housing market. In fact, the data supports this trend--the homeownership rate among households headed by someone under age 35 increased the most of any age group in the fourth quarter of 2017, jumping from 34.7 percent a year earlier to 36 percent."
First American added of the 50 top markets, 33 experienced increases in the share of millennial homeowners, another indicator that exposes the myth of millennials being destined to rent. "These results are consistent with findings that millennials are buying in cities large and small," Fleming said.
And Ellie Mae found Millennnials are more than qualified to buy homes, despite student loan deblt. It reported at 724, the average FICO score for Millennial borrowers has generally held steady since last June. The average FICO score for female borrowers in February was 723. It was 725 for male borrowers.
"Are millennials destined to be a generation of renters? Consider that myth busted," Fleming said. "Quite the opposite, actually--and they're just getting started."