Millennials Warming Up to Hot Housing Market

Despite–or in spite of–rising interest rates, a growing number of Millennials have decided now is the time to buy a new home.

Ellie Mae, Pleasanton, Calif., said 83 percent of mortgage loans made to Millennial borrowers in February involved new home purchases, up by two percentage points from January, but three percentage points lower than a year ago, when interest rates were lower.

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.”

The Mortgage Bankers Association this week reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.69 percent. Freddie Mac, which uses a different calculation, reported the 30-year fixed rate at 4.40 percent, down from 4.40 percent the previous week.

The report said Millennials continued to favor conventional loans over FHA loans. Sixty-eight percent of the loans in February were conventional, the highest percentage since Ellie Mae began tracking these trends in 2016. FHA loans remained flat with the prior month at 28 percent, the lowest it has been since 2016.

Ellie Mae also said Millennial homebuyers closed their loans faster in February than the past two months. Purchase loans took an average of 41 days to close and refinance loans took an average of 43 days. It took substantially less time for FHA and VA refinance loans to close compared to recent months.

Other report highlights:

–The average loan amount for male Millennial borrowers was $199,352 in February, while the average loan amount for female borrowers was $189,084.

–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.

–The 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).