As the traditional home buying season kicked off, sellers held the upper-hand as low housing inventory drove competition among homebuyers, including millennials.
However, the competitive market did not deter millennials, even in some of the most expensive markets, as the percentage of purchase loans among these borrowers slightly increased to 89 percent in April, up from 88 percent in March, according to the latest Ellie Mae Millennial Tracker.
Closed refinance loans fell to 10 percent of all loans, down from 11 percent the month prior.
The percentage of closed loans for millennials in Los Angeles, New York, Chicago and San Francisco has steadily increased over the last three years. In April, the top metropolitan statistical areas where millennials accounted for the majority of closed loans included Bardstown, Ky. (73 percent); Hobbs, N.M. (71 percent); Dalton, Ga. (65 percent); Victoria, Texas (63 percent); and Appleton, Wis. (63 percent).
Interestingly, while millennials gravitate toward more affordable housing markets in the Midwest and Southeast, they are also continuing to settle down in more expensive markets in big cities. Over the last three years, the percentage of closed loans for homes near New York, Chicago, Los Angeles and San Francisco have increased, the report said.
“This new generation of homebuyers is making its presence felt across the country,” Ellie Mae’s Corporate Strategy Executive Vice President Joe Tyrrell said in the report. “Since the beginning of 2016, the percentage of millennials purchasing homes in the Bay Area has actually increased from 16 percent to 20 percent.”
Other key findings from the April data include:
• Time to close loans to millennial borrowers decreased in April, taking 42 days on average, down from 43 days in March.
• FHA loans remained popular with millennials, comprising 35 percent of all closed loans in April, down from 36 percent the month prior.
• Both conventional and FHA loans took an average of 42 days to close, on par with averages for March.
• The average FICO score for millennial borrowers was 720 in April, holding steady from the month prior.
• Across all loans, both the average debt-to-income ratio and loan-to-value remained flat from the month prior, at 24/34 and 88, respectively.
“In this purchase centric market, we anticipate a continued rise in more creative lending products to help increase millennials’ access to credit and continue to counter concerns that rising interest rates will stifle volume,” Tyrrell said.