Newly Enthused Millennials Up Ante for Limited Inventory

Ellie Mae, Pleasanton, Calif., said Millennial homebuyers are taking out larger FHA-backed mortgage loans year-over-year. A separate report from Clever Real Estate, St. Louis, reported as Millennials get older, they increasingly see homeownership as a “fundamental value.”

The Ellie Mae monthly Millennial Tracker reported 26 percent of all closed loans to Millennials in November were for FHA loans, with an average loan size of $186,454, up from $178,862 a year ago and $170,167 in November 2016. Conventional loans accounted for 69 percent of closed loans made to Millennial borrowers during the same period, with an average loan amount of $211,268. Additionally, 2 percent of loans were for VA loans and 3 percent were unspecified.

Ellie Mae reported FHA loans were more likely to be used by borrowers to purchase a home (95 percent), with just 5 percent of these type of loans going toward a refinance. Among conventional loans, 88 percent were for purchases and 11 percent were for refinances.

“Millennial borrowers are taking out larger FHA mortgages and spending more on a home than in the past,” said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “We are seeing that as inventory remains relatively slim, borrowers are not waiting to buy an affordable home and are instead increasing their loan amount to purchase what is available on the market.”

Additional data:

–Men were listed as the primary borrower for 56 percent of FHA loans, women were listed on 35 percent and 9 percent were unspecified.

It took an average of 43 days to close both FHA and conventional loans across the country, compared to the average of 42 days for all loans.

–Interest rates on all loans rose to 5.1 percent, the highest percentage point since Ellie Mae started tracking this data in 2016, up from 4.96 percent in October, and up from 4.17 percent a year ago.

–The average FHA loan borrower FICO score was 680 and the average score for those who opted for Conventional loans was 744.

Meanwhile, the Clever study found that while Millennials have, generally speaking, not been a top priority for the real estate industry at large, that picture is changing.

Clever reported 84% of Millennials believe buying a home remains a core component of the American Dream; a corresponding Bank of America study found a majority prioritize homeownership (72%) over other major life events and goals, such as getting married (50%) and having children (44%).

“In other words, for many Gen Y-ers [Millennials], buying a home isn’t just about being sensible–it’s a fundamental value,” the study said. “All of this is to say that Millennials are already well on their way to becoming the driving force in the residential real estate market, a role they’ll likely continue to play for decades to come.”

Kay study findings (1,000 Millennials surveyed):

–Nearly 79% of Millennials are first-time home buyers. Because they’re new to the process, most (82%) are looking for helpful online tools and trustworthy real estate agents to guide them.

–Millennial home buyers are thinking long-term when it comes to where they buy–contrary to popular belief, they value safe neighborhoods and good schools over walkability and short commutes.

–Millennials aren’t afraid of a fixer-upper–67% would put an offer on a home in need of major repairs.

–Saving for a down payment is the biggest barrier to entry for millennial home buyers, but nearly 84% believe that homeownership is part of the American Dream.

–When it comes to reaching Gen Y home buyers, mobile reigns supreme–63% of millennial respondents said their phone was their primary research tool.

–Zillow wins out as the most popular real estate search portal among Millennials.

–The majority of millennial home buyers are white (58% of respondents compared to 8% of African American respondents). 20% of millennial home buyers are living with a partner, but not married (more than any other generation).

–Millennials are 52% more likely to buy a multi-family property compared to Generation X and Baby Boomers.

The study can be accessed at