As millennials become more established in their careers and start families, they are increasingly becoming the biggest segment of the home-buying market. According to the National Association of Realtors’ 2018 Home Buyer and Seller Generational Trends study—which evaluates the generational differences of recent home buyers and sellers—more than one-third of all home purchases in the U.S. were made by people between the ages of 19 and 27 during the past year, making this segment of the population the most active generation of buyers for the fifth consecutive year. Millennials also now represent more than two-thirds of all first-time home buyers, NAR says.
According to the survey, 36 percent of all homes sales were made by millennials from July 2016 to June 2017, compared with 34 percent from the previous survey. Gen X buyers ranked second at 26 percent, followed by younger (18 percent), older baby boomers (14 percent) and the Silent Generation, those born between 1925 and 1945 (6 percent).
Revealing the greater purchasing power needed during the past year, the typical millennial buyer in the survey had a higher household income ($88,200) than a year ago ($82,000) and purchased the same-sized home (1,800 square feet) at a more expensive price ($220,000; $205,000 in 2017). Millennials also had higher student debt balances than in last year’s survey, and slightly more of them said saving for a down payment was the most difficult task in buying a home.
In addition, these buyers base their decisions to purchase a home on living close to friends and family rather than a home’s location and proximity to schools. An overwhelming majority also used a real estate agent to buy or sell a home. Yet another important survey finding showed millennials becoming more important to the mortgage market, with a notable change in borrowing patterns showing millennials moving away from the Federal Housing Administration (FHA) program and toward conventional loans due to new loan programs with higher loan-to-value or lower requirements for down payments. According to millennial trend tracker Ellie Mae, 67 percent of the mortgages taken out by millennials in January 2018 were conventional loans, while 28 percent were FHA-backed loans. In January 2017, the FHA share was 36 percent and conventional about 61 percent.
Don’t hesitate to contact your PERL Mortgage Loan Officer if you have any questions or would like to receive more information on home purchase or refinancing options!