NMP - April 2017 - 92

Are the Millennials Finally Becoming
a Force in Homeownership?
By Phil Hall

or what seemed like
the longest time, the
housing industry has
pegged Millennials as
the next great force of
purchasing power.
Andy W. Harris, president of Lake
Oswego, Ore.-based Vantage
Mortgage Group Inc. and treasurer
of NAMB-The Association of
Mortgage Professionals, identifies
this youthful demographic as his
largest customer base-as well as
being, ready, willing and able to
take advantage of the Portlandarea's market.
"They are better prepared than
most would think," said Harris.
"They have set conservative
budgets, have downpayments, are
financially responsible, have
access to more data and are more
tech-savvy. They are much more
educated when they arrive for the
initial meeting. They are the driving
force for us."
But is Harris experiencing the
exception rather than the rule? In
June 2016, a survey conducted the
National Association of Realtors
(NAR) found 52 percent of
respondents lamenting that their
student debt levels will prevent
them from homeownership for
more than five years. Broken down
by demographic and debt amount,
the greatest level of pessimism on
potential ownership involved older
Millennials between the ages of 26
to 35 (79 percent) and those with
$70,000 to $100,000 in total debt.
Over 80 percent of Millennials also
said their delay in pursuing
homeownership was caused by an
inability to save for a
downpayment.
"A majority of non-homeowners
in the survey earning over $50,000
a year-which is above the median
U.S. qualifying income needed to
buy a single-family home-
reported that student debt is
hurting their ability to save for a
down payment," said NAR Chief
Economist Lawrence Yun. "Along
with rent, a car payment and other
large monthly expenses that can
squeeze a household's budget,
paying a few hundred dollars every

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APRIL 2017 n National Mortgage Professional Magazine n

NationalMortgageProfessional.com

92

month on a student loan equates
to thousands of dollars over
several years that could otherwise
go towards saving for a home
purchase."
What's going on here? Are the
Millennials finally making it into the
housing market? Or are they still
being held back by financial
considerations, most notably, the
burden of student loan debt? The
answer, it appears, is that both
questions can be answered
affirmatively. Yes, the Millennials
are buying homes. But, at the
same time, this is not happening
on a broad national scope.
According to Zillow, Millennials
made up 42 percent of
homebuyers last year, more than
any other generation, But some
markets seem to have better luck
with Millennial homebuyers than
others. A recent study from earlier
this year by LendingTree found
Pittsburgh at the top of the list of
major markets where Millennials
are looking to buy a home, with
48.4 percent of all purchase
mortgage requests coming this
demographic. Washington, D.C.
was the second most popular
market, with 46.8 percent of all
purchase mortgage requests
generated by Millennials, and Des
Moines, Iowa, was in third place at
46.4 percent. The average home
loan amounts sought by Millennials
in those markets were $201,921;
$381,110 and $173,439;
respectively.
"Thanks to a stronger jobs
market and overall economy, the
35-and-under crowd is growing
up," said Doug Lebda, CEO of
LendingTree. "Although Millennials
have been slow to the real estate
market, the appeal of
homeownership remains strong,
and we're beginning to see more
activity with this generation. Rising
home prices and high student loan
debt are still affecting the purchase
power of Millennials, but as more
student debt is repaid and the job
market improves, we're likely going
to see more young buyers in this
spring homebuying season than in
previous years."

In some pricey markets,
aggressive Millennials are on the
house hunt. LendingTree also
found that 44.3 percent of home
loan requests in San Francisco
came from Millennials, with the
mortgage requests averaging
$528,761. But not every Millennial
can carry a mortgage for more
than a half-million dollars. A
separate study released in April,
the Bay Area Council found 46
percent of Millennial respondents
were considering an exodus from
this metro area, citing the very high
cost of living and housing. This
was the largest age-based
demographic to acknowledge a
possibility of leaving based on
financial pressures.
"I would say the thinking
amongst younger folks that the
Bay Area doesn't hold their future
is really settling in and that's
concerning," said Bay Area Council
President Jim Wunderman.
Not surprisingly, many
Millennials are flocking to areas
where housing is more affordable.
A pair of upstate New York
markets, Albany and Buffalo,
turned up in a recent Realtor.com
survey of the markets with the
highest levels of Millennial
homeownership, due primarily to
their affordability level. Realtor.com
noted that Buffalo was the nation's
top metro area with the most
affordable home prices relative to
salary, at 22.7 percent, followed by
Albany where people only use 27.3
percent of their income on a home.
By comparison, buyers use 30
percent of their income for
housing-related expenses In Salt
Lake City, which ranked at the top
of Realtor.com's list for Millennial
housing presence, where buyers
use 30 percent.
"High job growth in markets
such as Orlando, Seattle, and
Miami, and the power of
affordability in places like Albany
and Buffalo are making these
markets magnets for Millennials."
said Javier Vivas, manager of
economic research for
Realtor.com. "But what really
stands out is that all these markets

already have large numbers of
Millennials, which translates into
strong populations of Millennial
homebuyers."
Nonetheless, the concept of
Millennials as being automatically
attracted to the big cities is not
correct-at least according to
Zillow, which determined that
almost 50 percent of Millennial
homeowners live in the suburbs,
while 33 percent live in an urban
neighborhood and 20 percent live
in a rural area. Of the Millennial
buyers who moved in the past
year, 64 percent stayed in the
same city, while only seven
percent moved to a different state.
As for the concept of new
homebuyers aiming for the
traditional starter home, Zillow
found that Millennials are spending
$217,000 for a home that is about
1,800-square-feet, which similar in
size to the homes being sought by
older generations.
"Millennials have delayed
homebuying more than earlier
generations, but don't
underestimate their impact on the
housing market now that they're
buying," said Jeremy Wacksman,
Zillow Group's chief marketing
officer.
But how they're buying
deserves attention: Roughly onethird of mortgages used by
Millennial homebuyers originate
with the Federal Housing
Administration (FHA).
"As the purchase market heats
up, we will continue to watch the
FHA purchase trend amongst
Millennials," said Joe Tyrrell, Ellie
Mae's executive vice president of
corporate strategy. "It is not
surprising to see Millennial
borrowers leverage FHA loans
because they typically offer lower
downpayments and lower average
FICO score requirements than
conventional loans. As more
Millennials enter the market, we
expect to see the popularity of
FHA loans continue to increase."
But what about that student
debt problem? Even the Federal
continued on page 94


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