Higher Rates Did Not Deter Millennials

Summer temperatures and higher rates appeared to have little effect on the Millennial homebuying market, according to August data from the Ellie Mae Millennial Tracker. Conventional loans remained steady at 64 percent of all closed loans by this generation, while FHA mortgages stayed at 32 percent—a market share they have held since June. The average loan amount for loans closed by Millennial borrowers in August of 2017 was $185,919, a slight increase from August 2016’s average $184,113, despite the average 30-year note rate having increased to 4.211 percent from 3.706 percent last year.

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In August 2017, the average Millennial primary borrower was 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. This average homebuyer 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.

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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.

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Overall, Millennials were most likely to close loans for the purpose of purchasing a home (87 percent). Refinances accounted for 12 percent of loans closed by Millennials in August.

“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 key findings from the August 2017 Ellie Mae Millennial Tracker include:

The 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.

Males made up 60 percent of the Millennial market in Lima, Ohio, with loans averaging $86,845 and averaging borrower FICO scores coming in at 725.

The Ellie Mae Millennial Tracker is an interactive online tool that provides access to up-to-date demographic data about this new generation of homebuyers. It mines data from a robust sampling of approximately 80 percent of all closed mortgages dating back to 2014 that were initiated on Ellie Mae’s Encompass all-in-one mortgage management solution.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.