Mortgage Watch | May 13, 2019

Trailing edge millennials face growing obstacles to home ownership

There is always a lot of talk about millennials, their lifestyles, and their penchant to become homeowners. Real estate gurus try to predict what they will do next, while the final wave of them is now making the news. Publications like Forbes Real Estate is making its predictions, with writer Brenda Richardson saying that it’s about to get even harder for trailing-edge millennials to buy their first homes.

“Nearly 45 million Americans will reach the typical age for first-time home buyers within the next 10 years, 3.1 million more than the past decade, creating stumbling blocks in an already challenging market for those racing for a spot in the starter home market,” she says. She continues by saying that the median first-time home buyer in the U.S. is 34 years old with 44.9 million Americans aged 24 to 33, compared with 41.8 million people ages 35 to 44.

Richardson’s research relies on studies by Zillow, which now say that starter homes have gained 57.3% in value over the past five years, a median increase of $47,600, while for-sale inventory in this price range has dropped 23.2%. Over the same period, the most expensive third of starter homes gained 26% in value, and homes in the middle third appreciated 36.8%.

Non-institutional lender Mr. Cooper (a leading mortgage lender) says reasons millennials might want to own a home include security, independence, building equity, stability, and financial flexibility. But saving for a down payment is an issue. It is documented that today’s first-time buyers need 18 months longer than they did 30 years ago to secure a loan and that nearly four times as many first-time buyers who obtained a mortgage last year were denied at least once (29%) compared to repeat buyers (8%).

“The Mr. Cooper report found that 58% of aspiring homeowners lack the funds for a down payment,” says Richardson. “Nearly half (43%) don’t have a financial plan in place to purchase a home someday; 75% would be willing to work a side job if it meant owning a home sooner, and 36% would have a roommate if it meant being able to afford a home sooner.”

If you’re looking to buy your first home and feel you can establish yourself just about anywhere for employment, the 3 best markets in the 2019 home shopping season are Tampa, Las Vegas and Phoenix, according to the article, citing relatively affordable markets with median home values well under $300,000. Price cuts in those markets are helping, offering first-time buyers a tad more bargaining power.

On opposite coasts, San Diego and Boston are expected to see the largest jumps in potential first-time buyers with both metros slated to see a nearly 20% increase in the next wave of potential first-time home buyers compared with the previous wave.

Richardson explains how buyers making the transition from renting to homeownership help ease rental demand, which holds down rent-price growth. But if those trailing-edge millennials can’t purchase homes, it could drive up rent prices as well as home values.

Source: Forbes, Zillow, TBWS

Rates Currently Trending: Lower

Mortgage rates are trending slightly lower so far today. Last week the MBS market worsened by -7bps. This caused rates to move sideways for the week. We saw low rate volatility for the week.


About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 26 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.