boomers

Millennials and Home Buying Revisited

by Kevin Hawkins on October 27, 2015

The great statistical debate continues on the impact of Millennials today on home buying. About a year ago, I wrote about the conflicting data (“Millennial Marketing Madness”) that argued Millennials were not going to drive the majority home sales in 2015 despite what marketers and self-interested parties were claiming. Fast-forward today, and it looks like the hardcore data was accurate and the marketers missed the mark. Today’s headlines have taken quite a turn from those we saw last year. Now those pundits who said Millennials would be driving today’s housing market are scrambling to explain why they are not or aggressively marketing to Millennials to tell them why they should buy. Among recent headlines: Millennials face tough obstacles to buying a home (Boston Globe) Whether They Want to Rent or Buy a Home, Millennials Are Basically Out of Luck (Slate) Why Millennials Are Having a Tough Time Buying A Home (The Street) 4 Reasons Millennials Still Aren’t Buying Houses (Forbes) Millennials better off buying a home than renting (Houston Chronicle) Why Millennials should buy a home today (Builder magazine) It’s Better for Millennials to Buy Than Rent—For Now (Bloomberg) If you want a dose of what is really going on, talk to mortgage loan officers who are in the trenches every day trying to help folks navigate the mortgage morass that exists today. They will most likely tell you top three things that are keeping most Millennials from buying homes are: DTI, DTI and DTI. I reached out to Matt Culp, whom I consult for and who owns Bainbridge Lending Group, a small, successful brokerage firm on Bainbridge Island, WA. In the articles (above) they often discuss DTI thresholds, credit score minimums, and interest rates, yet they fail to point out that these three things are interconnected. Matt, who grew up in the mortgage business and has a couple of decades of experience, reminded me these factors are much more like a matrix, with one impacting the other. You can’t just say that a Millennial who has a DTI of 43 percent and credit score of 620 is going to get a 30-year fixed rate loan with no points for 3.75%. A higher credit score is going to get you the better interest rate. To get the best rate, you need a credit score of at least 740 or higher today (most stories keep reporting 720; just not true in […]

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