As the traditional home buying season kicked off, the seller held the upper-hand as low housing inventory drove competition among homebuyers, including millennials. However, the competitive market did not deter millennials—even in some of the most expensive markets—as the percentage of purchase loans among these borrowers steadily increased to 89 percent in April, up from 88 percent in March, according to the most recent Ellie Mae Millennial Tracker. Closed refinance loans fell to 10 percent of all loans, down from 11 percent the previous month.
In April, the top metropolitan statistical areas where millennials accounted for the majority of closed loans included Bardstown, Ky. (73 percent), Hobbs, N.M. (71 percent), Dalton, Ga. (65 percent), Victoria, Texas (63 percent) and Appleton, Wisc. (63 percent). Interestingly, while millennials gravitate toward more affordable housing markets in the Midwest and Southeast, they also are continuing to settle down in more expensive markets in big cities. During the past three years, the percentage of closed loans for homes near New York, Chicago, Los Angeles and San Francisco have increased.
“This new generation of homebuyers is making its presence felt across the country,” says Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “Since the beginning of 2016, the percentage of millennials purchasing homes in the Bay Area has actually increased from 16 percent to 20 percent.”
The major metropolitan areas are seeing healthy participation from millennials, with the New York area experiencing an increase from 19 percent in 2015 to 24 percent of homebuyers being millennials in 2017. The growth has been even more impressive for areas such as Chicago and Dallas, with Chicago seeing an increase from 22 percent to 31 percent and Dallas experiencing an increase from 21 percent to 31 percent during that same time.
“In this purchase-centric market, we anticipate a continued rise in more creative lending products to help increase millennials’ access to credit and continue to counter concerns that rising interest rates will stifle volume,” says Tyrrell.
Here, some other key findings from the Ellie Mae data:
• The time to close loans to millennial borrowers decreased in April, taking 42 days on average, down from 43 days in March.
• FHA loans remained popular with millennials, comprising 35 percent of all closed loans in April, down from 36 percent the previous month.
• Both Conventional and FHA loans took an average of 42 days to close, on par with averages for March.
• The average FICO score for millennial borrowers was 720 in April, holding steady from the previous month.
• Across all loans, both the average debt-to-income ratio and loan-to-value remained flat from the previous month, at 24/34 and 88, respectively.