SANTA CLARA, Calif.,
Feb. 20, 2019 /PRNewswire/ --
Realtor.com®, the Home of Home Search℠, today released
new survey data revealing members of the millennial generation have
increased their home buying purchase power and now boast the
largest share of new home loans by dollar volume, larger than both
Generation X and the baby boomer
generation[1].
These insights, based on a realtor.com® analysis of
residential mortgage loan originations from Optimal Blue, show that
while the median home buying price millennials take on is still
lower than that of Generation X or baby boomers, millennials are
showing interest in more affordable markets. Additionally,
millennials are making lower down payments and taking on larger
mortgages when compared to Gen Xers and baby boomers.
"Millennials are getting older, with better jobs and deeper
pockets, allowing them to expand their collective purchase power,
and hence, their footprint in the market," said Javier Vivas, director of economic research at
realtor.com®. "The stereotype that millennials primarily
choose to buy homes and live in large metro areas isn't the
reality. Results show millennials' expansion is more heavily
conditioned by affordability than in prior years, so their eyes are
set on less traditional secondary markets where homes and jobs are
now available and plentiful."
Affordability is such a key factor for millennial home buyers
that this generation is moving to places previous generations have
not, like Buffalo, N.Y., the top
affordable market for millennials, according to this study.
Millennials Now Have More Buying Power
Millennials
are still primarily in the life stage that requires starter homes.
Despite a lower median purchase price ($238,000) than the two generations before them,
(with baby boomers and Gen Xers spending an average of $264,000 and $289,000, respectively), millennials are
increasing their purchase price at a faster rate than previous
generations, indicative of this generation starting to move beyond
starter homes.
Since early 2017, millennials have been the largest mortgage
purchasers by the number of loans originated, surpassing Generation
X as the leader in January 2017. As
2018 came to a close, millennials took on nearly half (45 percent)
of all new mortgages, compared to 36 percent for Generation X, and
17 percent for baby boomers.
In November 2018, millennials
finally overtook Generation X as having the largest share of new
loans by dollar volume, with a share of 42 percent in December,
compared to a share of 40 percent for Generation X and 17 percent
for baby boomers. This indicates millennials are willing to take on
larger mortgages than any other generation to fulfill their dreams
of homeownership.
Millennial Home Buying is Driven by Affordability
In
addition to increasing their buying power and taking on larger
mortgages, the data shows millennials have consistently made lower
down payments than other generations since 2015. While other
generations have increased their down payments in response to
rising prices, millennials have not been able to increase their
down payments as much as older generations. Millennial down
payments averaged 8.8 percent in December
2018, compared to 11.9 percent for Generation X and 17.7
percent for the more equity-rich baby boomers.
Given that the majority of millennial home buyers are searching
for their first homes and do not bring equity from a previous home,
it's no surprise they are putting down smaller down payments. This
is likely a driver of their activity in more affordable markets,
where their money goes further.
Top U.S. Markets for Home Buyers Varies by Generation
Within the last year, millennials have moved to affordable areas
with strong job markets where they have more buying power. At the
end of 2018, the median price of a mortgaged home purchased by
millennials was $238,000,
$26,000 less than the median price of
a home mortgaged by baby boomers ($264,000) and $51,000 than Generation X ($289,000). The top five markets where
millennials now generate more than 50 percent of the mortgages and
their share grew by more than four percent are:
- Buffalo, N.Y.
- Pittsburgh
- Milwaukee
- Cincinnati
- Columbus, Ohio
As members of Generation X are in their prime income-earning
years, they purchased homes in strong job markets and secondary
home markets, with five of the 10 markets on the list having
unemployment rates higher than the national rate of 3.7 percent.
The top five markets where Gen X purchased a large and/or growing
share of homes are:
- Los Angeles
- Providence, R.I.
- Bridgeport, Conn.
- Jacksonville, Fla.
- Atlanta
Many boomers are retired or rapidly approaching retirement, and
therefore, showed a strong preference for buying homes in markets
within primarily low-tax states or markets that are lower-cost than
nearby metros, presumably to maintain wealth earned during their
working years throughout their senior years. The top five markets
where boomers made up a large and/or growing share of mortgaged
purchases are:
- Knoxville, Tenn.
- Sacramento, Calif.
- Memphis, Tenn.
- Oklahoma City
- Riverside, Calif.
Methodology
This report on loan originations by age
and generational groups is based on a realtor.com®
analysis of a sample of residential mortgage loan originations from
Optimal Blue. The 'Generational Scores' were calculated using an
equal weighting of a group's mortgage origination share and year
over year share growth within a particular metro.
About realtor.com®
Realtor.com®, The Home of Home Search℠, offers an
extensive inventory of for-sale and rental listings, and access to
information, tools and professional expertise that help people move
confidently through every step of their home journey. It pioneered
the world of digital real estate 20 years ago, and today is the
trusted resource for home buyers, sellers and dreamers by making
all things home simple, efficient and enjoyable.
Realtor.com® is operated by News Corp [NASDAQ: NWS,
NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. under a perpetual
license from the National Association of REALTORS®. For more
information, visit realtor.com®.
Media Contact
Lexie Puckett
Holbert
lexie.puckettholbert@move.com
[1] Greatest Generation: < 1946;
Baby Boomers: >= 1946 AND <= 1964; Generation X: > 1964
AND <= 1981; Millennials: > 1981 AND <= 2000; Generation
Z: > 2000.
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SOURCE realtor.com