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Ellie Mae finds millennial mortgage trends are shifting

Evidence that millennials have taken over as the biggest movers of the mortgage market mounts by the month, and more trends are emerging to paint a picture of their buying habits.

Affordability remains the primary driver of millennial buying habits, although other factors have started to show up as real trends. In an interview with Scotsman Guide News last week, Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae, noted that millennials are increasingly eschewing the city to find more space for their pets, for example.

“It sounds kind of funny, but it’s real,” Tyrrell said.

Millennials are America’s primary pet-owning demographic, with 35 percent of pets owned by the cohort, according to the 2017-2018 National Pet Owners Survey from the American Pet Products Association. With millennials half as likely to be married or living with a partner as people 50 years ago, finding space for their four-legged household companions is becoming an increasing consideration.

That factor, among others, is progressively moving millennials away from the city, Tyrrell said.

“Urban fatigue is real,” he said. “We just started looking at it and we’re looking at different data points. It’s more qualitative than quantitative at this point, but you can start to see some of trends emerge. And they’re all pointing away from the big cities.”

Tyrrell points to Texas as an example. Ellie Mae data shows the sprawling Dallas area is posting a share of slightly less than 30 percent of mortgages closed by millennials. Midland, Texas, just four to five hours west of Dallas and offering much more space for the dollar, has more than double that percentage. In nearby Odessa, it’s 60 percent.

“You can start to see there's a shift where people are looking to go a little farther out because they can virtually commute in order to essentially have a better lifestyle,” Tyrrell said.

Another trend is that the median homebuying age for millennials hasn’t seen a real shift. Ellie Mae has been tracking the average primary borrower age for the last four to five years, according to Tyrrell, and despite increasing purchase prices and the revelation that more young adults are choosing to live with their parents, there hasn’t been a significant increase or decrease in the median millennial homebuyer age.

“It's been reading pretty consistently between 29 to 30 years old,” Tyrrell said. “I think it's more that you're seeing kind of a maturation at that level maybe a little bit earlier. Think about what these millennials have grown up with, right? They've grown up in an age of domestic terrorism. They've grown up in an age with a housing crisis that happened and they saw their parents go through. I think you're seeing a millennial generation that's maybe starting to mature a little bit earlier at the 28, 29, 30 age because they've had more serious lives to deal with.”

“What we are seeing, though,” he added, “is that refinance percentages are increasing across the millennial [generation]. What that's telling you is the millennials that may have gotten into that first home two, three or four years ago, instead of moving up, they're refinancing. Maybe they’re taking cash out. Maybe they're doing improvements. We're definitely seeing the refinance percentage increase, which tells you that those millennials are starting to be at a point where they are recommitting to that home.”

Tyrrell likened the percentage increase of millennials who are refinancing to the trend of seniors aging in place, although he said it was too soon to say if this would keep enough starter homes off the market and away from future first-time buyers.

He also noted that millennials are propelling demographic swings within the mortgage industry in areas where they are finding affordable housing.

“One of the interesting things we are seeing is, if you look at the percentage of the time that the primary borrower is female versus male, we're starting to see some changes in trends there,” Tyrrell said. “For example, in California and Arizona [where millennials are lagging behind other cohorts in mortgage market share], 64 percent of the primary borrowers are male. But in Minnesota [where their share is growing], it's 58 percent. In Wisconsin, it's 56 percent. Women are playing an increasingly larger role as the primary borrower.

“What that also tells you is these millennials, they're not necessarily waiting for family formations. Because what we also see in certain MSAs (metropolitan statistical areas) is, you have single women who are the primary borrowers that are representing a majority of the loans getting closed in those areas. The traditional family formation where the man is the primary borrower and the spouse is the co-borrower — we're seeing those trends starting to be broken. Young, single women are taking the lead in some of these MSAs and starting to really flex their purchase power as well.”


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