JANUARY 18TH, 2019


Today, let’s talk about millennials. As the biggest demographic within the mortgage market, understanding millennials will become more and more important going forward, and they’re different than any generation before them. First, millennials are facing a lot of obstacles in their pursuit of home ownership, such as affordability issues, down payment issues, debt issues, and a limited entry-level housing market.

Millennials making the median income, given that they save 10% of their income towards a down payment each year, would have to spend over 11 years savings before they could buy the median-priced home. Then, there’s the trouble of finding a home. Last June, only 21% of houses on the market were entry-level homes. This leads to only 4.9% of millennials who say they’re able to buy a home within the next year, while 34% say it’ll be upwards of 5 years before they can buy a home. Therefore, many are turning to renting, which according to another 2018 statistic, is 11% more expensive than their home-buying peers should expect to pay.

Furthermore, roughly 23% of 24-36 year olds (12.3 million) are currently living with their parents because even renting is unaffordable due to stagnant wage growth. One of the main culprits is student debt, which although is not completely de-railing homeownership, is definitely delaying it for many young Americans. According to a new Federal Reserve report, from 2005 to 2014, student debt per capita doubled from $5,000 to $10,000. Looking back at 2014, an estimated 400,000 millennials would’ve owned homes if not for the increases in student debt. This leads to experts estimating that student debt may be hindering young adult homeownership by as much as 20%. Out of the class of 2017 alone, the average student debt was $40,000, which is almost as much as a 20% down payment on the median-priced home.

So what do you do with this information? Well, it’s important to know that the majority of millennials still believe in homeownership and want to eventually buy a home. They’re moving toward low-DP alternatives, and many are finding more creative ways to save for a home, such as using crowd funding to fund their down payments. As an LO, you have to spend more time (and do a good bit of hand-holding) educating your millennial customers on the mortgage process and guidelines, the mortgage market, budgeting, showing them the benefits of homeownership over renting, and giving them simple yet powerful tools to save for and find an affordable home. (Sources: Federal Reserve, Zillow)

Michael Brucato