The Misunderstood Millennials and the Mortgage Industry

With the prevalence of Millennial-speak that has bombarded the news and headlines for the past 24 months, you might be (rightfully) confused as to what to believe about this misunderstood generation, also known as Gen Y.

However, if you consume financial news — whether it’s the newspaper, internet, television or radio — you can’t seem to avoid the discussion of how Millennials (ages 18-34 in 2015) are impacting the economy and the mortgage industry. With Gen Y more than 75 million strong, it’s hard to deny the impact they do and will have.

“Millennials spend more than $600 billion per year, which by some estimates, could grow to nearly $1.4 trillion by 2020.”

But, as many current headlines reflect, there seems to be no consensus on their impact on the housing market. One day you may see a headline that reads, “Millennials are having a big impact on the housing market” and the next day, one that claims, “Millennials are not quite ready to buy homes.” The result can lead to misunderstanding of Millennials and the mortgage industry.

One of the great debates in the mortgage industry today is whether the Great Recession has diminished the desire to own a home among younger households.

Those who support the premise of waning desire will point to the declining homeownership rate, especially among those 35 and younger, as evidence. Others point to affordability issues of rising rates and home values combined with low wage growth and student debt load as a cause for a shift away from homeownership.

On the opposite side of the argument are those who point to the restricted supply of housing due to approximately 9 million underwater properties as a factor in low home sales. Others say it’s a function of the increasing average age at which people get married that’s driving the delayed home-buying process for Millennials. [iii] Yet others blame restrictive lending standards for leaving many younger, lower-wealth borrowers on the outside looking in. For example, despite the fact that since 2009, MGIC has insured loans with credit scores as low as 620, our insured loans’ FICO score average is north of 740. In contrast, in the late 1990s and early 2000s (pre-bubble era loans), the business our customers sent us had an average credit score closer to 700.

Past articles on this blog have talked about how loan officers can use social media to develop more leads. But until you jump into the pool and pursue these Gen Y leads, you won’t be able to use those strategies. Average Millennials who recently purchased a home earned more than $76,000 per year and had an average down payment of $13,000.[iv]