Higher Rates Not Deterring Millennials
The news about Millennials and homeownership is not all dreary. Ellie Mae, Pleasanton, Calif., said summer temperatures and higher rates appeared to have little effect on the Millennial home buying market.
The company’s monthly Millennial Tracker said conventional loans remained steady at 64 percent of all closed loans by Millennials in August, while FHA mortgages stayed at 32 percent, a market share they have held since June.
Average loan amounts for loans closed by Millennial borrowers in August rose to $185,919, a slight increase from a year ago ($184,113), despite the average 30-year note rate increasing to 4.211 percent from 3.706 percent last year.
Ellie Mae reported the average Millennial primary borrower as a 29.4-year-old who took out a conventional loan of $185,919 to purchase a home with an average appraised value of $223,882. The buyer had a FICO score of 724, which helped them get a 30-year note rate of 4.211 percent, and they closed on their home in 44 days. The majority (64 percent) of primary borrowers were male. Additionally, more than half (52 percent) of borrowers were married.
On the West coast, the average Millennial borrower was slightly older, at 30.6 years old, taking out a loan of $314,579 on average. Average loan amounts were lower in the Midwest, with homebuyers of age 29.5 closing loans averaging $158,584 in Kansas, for example. In Hawaii, borrowers of 31.4 years took out loans averaging $396,766.
The report said Millennials were most likely to close loans for the purpose of purchasing a home (87 percent); refinances accounted for 12 percent of loans.
“Average loan amounts in August of this year were slightly higher than last year, despite higher interest rates,” said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “As tends to happen with tight inventories, this is a seller’s market, and many of today’s homebuyers may be faced with paying a premium for the same home they might have bought for less last year. For those who are committed to buying a home, though, slight increases in competition, costs or interest rates will likely not deter them.”
Other report highlights:
–Top five markets where Millennial borrowers represented the highest percentage of homebuyers in August were Lima, Ohio, Batavia, N.Y., Dyersburg, Tenn., Roswell, N.M., and Kendallville, Ind.
–Female homebuyers increased their purchase power, with closed loans in August averaging $189,574, up significantly year-over-year from $184,094. Males took a slightly smaller jump, averaging $196,246 in August 2017, versus $194,913 last year.
–The metropolitan region with the largest percentage of female homebuyers (63 percent) was Mankato, Minn., with an average loan amount of $136,597 and average borrower FICO score of 723.
