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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Why Millennials won’t buy Boomer McMansions

by Kevin Hawkins on August 19, 2015

Self-confession: I love surveys. Data is my kryptonite. I got hooked in my grad school stats class and I’ve never looked back. At Great Western Bank, I created the Realty Confidence Index, which surveyed face-to-face broker-owners in 23 states. At Fannie Mae, I got to pitch to reporters nationwide the most comprehensive housing surveys of its day. At Imprev, I helped craft and launch the real estate industry’s first Thought Leader Survey and continue to spearhead that effort. This all means I know intimately what Mark Twain meant when he popularized the saying, “There are lies, damn lies and statistics.” Two people can draw completely different conclusions from the exact same data. Which is why I am having problems with a few statistics about Millennials and their immediate impact on home buying: Zillow’s economist Stan Humphries says, “By the end of 2015, millennial buyers will represent the largest group of homebuyers.” The National Association of Realtors 2015 report on generational trends says that Millennials make up the largest share of homebuyers at 32 percent and comprises 68 percent of first-time buyers. A TD Bank survey says that 62 percent of potential first-time home buyers think that they will purchase a home within the next two years; among millennial survey respondents, the number rises to 67 percent. The problem I am trying to reconcile is that there are many other statistics that seem to contradict the notion that Millennials are going to drive the housing market, including the numbers below, from a blog (“Millennial Marketing Madness”) I wrote last November provided by economist Elliott Eisenberg: In 2010, households headed by Millennials had a median income of $37,600, now it’s just $35,300. 41.4% of Millennials have student loans, which is up from 33.6% in 2007 and 23.3% in 1998. Student loan balances are up from $10,000 in 1988 to $17,300 in 2013. Just 38.6% of Millennials hold equities, down from almost half in 2001. Median net worth for Millennials overall is a paltry $10,400. Add in these statistics from the TD Bank survey that touts how Millennials are going to “own” the housing market in the next two years: 70 percent of Millennial respondents said that they need to save for a down payment. 52 percent of Millennials said that they need to pay down debt. More than one-in-five consumers (22 percent) looking to purchase their first home said that they can’t […]