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What’s the deal with millennial homebuyers?

Category | Brokers in Lending | Brokers in Training | Economic Trends | Wholesale Lending News
There is a lot of mystery over whether or not millennials are interested in buying homes.

America is obsessed with the millennial generation, and for good reason. They are the largest shopping generation in history, and as a result their purchasing habits have a huge impact on the American (and global) economy. The housing market is no exception. Whether or not millennials are buying homes has significant consequences for buyers, sellers and mortgage brokers across the market. The only problem is no one can seem to agree on what millennials are actually doing. 

"Just because you want to buy a home, doesn't mean you can."

Do millennials want to buy homes? 
Generally speaking, yes. A survey conducted by Trulia found that 80 percent of Americans between the ages of 18 and 34 believe homeownership is a big part of achieving the American Dream. That figure represents the highest number of young Americans who think so since the survey began in 2010. 

The 18-34 age bracket is significant because first-time homebuyers tend to fall within the 25-34 age range. With significant financial burdens facing young people today, this number has been changing. Consumers have been buying their first homes later in life, but it doesn't seem to be because they actually want to wait. 

What stops millennials from buying? 
Just because you want to buy a home doesn't necessarily mean you can; despite so many millennials seeing homeownership as an important part of achieving their dreams, they aren't exactly entering the housing market in droves. According to the Washington Post, there are three major limitations preventing millennials from investing in their first homes: rising rent prices, strict credit qualifications and of course, those pesky student loans. 

Rising rent prices make homebuying a rather complicated matter.'s Chief Economist Jonathan Smoke explained to Bloomberg that while it is technically cheaper to buy than rent in the current market, high rent costs make it more difficult to save for a down payment. Smoke said those who earn enough to pay rent and save for a down payment at the same time will save more money in the long run, but of course many people do not have that luxury. 

So, are millennials buying or not? 
Due to the sheer number of millennials, it is possible for the answer to be both yes and no. Bloomberg declared that millennials will make up the largest portion of homebuyers in 2016, and Smoke forecasts they will purchase one-third of all homes next year.

Still, Bloomberg mentioned that Svenja Gudell, Zillow's chief economist, believes the age of first-time homebuyers will continue to rise. Not only are young people having trouble affording homes, but there are changing social dynamics at play as well. Millennials are getting married and starting families later than past generations did, which affects their need for owning a home. So while millennials will make up a large portion of the housing market next year, there will also be a large portion of millennials who continue to pay those high rents or sleep in their childhood bedrooms.

Smoke does believe, however, that this year is a turning point.

"We'll look back at 2015 and see that this is the beginning of the trend of millennials buying homes," he told the Washington Post, "Two or three years ago we saw the impact on the rental market of increasing household formations, and now those renters are becoming homeowners." 

Millennials want to buy homes, but are they doing it?Millennials want to buy homes, but are they actually doing it?

Where do millennials want to live?   
If Smoke is right and millennial interest in homeownership continues to grow, then mortgage brokers may want to take note of where millennials will be buying their first homes. Of course, it is less about where they want to live and more about where they can afford to live.

In early November, Credit Karma released a study that ranked the 10 most affordable cities for millennial homebuyers. They are as follows: 

  • Buffalo, New York
  • Cleveland
  • Detroit
  • Fort Wayne, Indiana 
  • Garland, Texas 
  • Indianapolis 
  • Memphis, Tennessee 
  • Milwaukee 
  • Pittsburgh
  • Toledo, Ohio

The survey measured affordability based on how long it will take the average millennial to pay off a mortgage in each city. The numbers fall between 107.4 months in Buffalo and 153.6 months in Milwaukee. These cities may be a little bit off the beaten path, but they offer lending options that are almost incomparable to larger, more prosperous cities. Credit Karma said in Los Angeles it would take the average millennial up to 534.2 months to pay off their mortgage. That means a millennial in LA could be sending in mortgage payments approximately 35.6 years longer than a millennial homeowner in Buffalo. 

Impac Mortgage Corp. Wholesale, offers a wholesale lender a variety of products to assist nonqualified buyers in receiving home loans. The increasing millennial interest in homeownership, combined with their increasing financial challenges, will push many nonqualified buyers to seek alternative lenders. Impac Mortgage Corp. Wholesale's AltQM™ product series will help brokers and their clients achieve that American Dream. 

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