The Rise in First-Time Homebuyers
Although Millennials are still saddled with large amounts of student loan debt and economic uncertainty, there are some factors that are driving more of this generation to begin buying their first homes instead of renting or living in their parents’ homes. According to John Clifford of Genworth Mortgage Insurance in a HousingWire article, there are a variety of reasons that are contributing to the rapid growth of the first-time homebuyer. The reasons include “affordability being extremely high, Millennials reaching home-buying age and rising rents.”
Marketing to the First-Time Homebuyer
As the 2008 housing crisis made home ownership impossible for many would-be homebuyers, rents began to dramatically increase. In many large metropolitan areas, renters find themselves either priced out of the market or dealing with a shortage of available units. To combat this, many home builders have begun to construct more affordable starter homes geared toward first-time homebuyers, as well as many housing agencies offering programs requiring small down payments and low interest rates for first-time homebuyers. With the high cost of renting in many cities, homeownership becomes even more appealing.
Reaching Millennial Homeowners
Another factor affecting the drive to buy for many Millennials is age. With the oldest Millennials being born in 1980 and age 36, more and more of this generation would like to have places of their own. Many people in this generation are starting families or growing in their career, which traditionally leads to homeownership. Stevens of Mortgage Bankers Association also predicts that household formations will increase to 1.6 million a year between 2015 and 2024, compared with the increase of 1.2 million a year between 2010 and 2014 per Visalia Times-Delta.
Overall, many in the mortgage industry expect first-time homeownership rates to steadily increase over time. Most in the mortgage industry see minority Millennials leading the way to the resurgence of first-time homeownership because of the lack of available places to rent, increasing the affordability of starter homes, size of this population, and their stage in life.
With this new demand for mortgage loans, FICS® understands that lenders require loan origination and mortgage servicing software solutions that are flexible and comprehensive. FICS keeps up-to-date on our technology so we can support you in meeting the needs of your present and future borrowers.