Photo: Robert Clark
Millennial demand for homeownership was one of the biggest drivers of the 2018 US housing market, a trend that is likely to continue well beyond 2019, according to a new report by First American, a provider of title insurance to the mortgage industry.
“The housing market is already experiencing the earliest gusts of the tailwind caused by Millennials entering the market,” reads the report.
In the third quarter of 2018, households under 35 years old contributed the most to overall homeownership growth. The trend will likely continue to grow in 2019, as more Millennials age and begin to settle down.
“With more Millennials aging into their early-to-mid thirties, and beginning to get married, have children and form households, they will continue to be the primary driver of homeownership demand,” reads the report.
And although Millennials are the largest demographic group in US history, they also have lower homeownership rates compared to previous generations when they were under 35 years old.
Currently, just over one-third of adults under 35 own a home.
For many Millennials who are saddled with student loan debt, saving for a downpayment is a Herculean task, and renting is the more financially sound option.
Since the end of the Great Recession, close to 7 million new rental households have formed. Yet only 2 million new homeowner households formed over the same period.
“Because Millennials grew up in the wake of the housing bust, they are less likely to consider homeownership as a means of building wealth and, therefore, choose homeownership based more on whether homeownership fits their lifestyle or not,” reads the report.
Millennials have put off major life events — like marriage and child rearing — longer than previous generations.
According to Census data, in the 1970s, eight in ten people were married by the time they were 20 years old. Today, however, the same level of marriage does not occur until the age of 45 — delayed lifestyle choices delay the desire for homeownership.
But as 2018 draws to a close, demand from first-time buyers is starting to surge as more Millennials age into their prime settle down and get married years.
Millennial males — both single and married — were listed as the primary borrower on 60 percent of all closed loans in October while women (single and married) were listed on 32 percent, according to the most recent Millennial Tracker from the government-backed mortgage processor Ellie Mae.
And, more than 50 percent of all purchase mortgages originated by the government-sponsored enterprises Fannie Mae and Freddie Mac went to first-time home buyers in 2018.
“Although housing prices and interest rates are still rising at a faster pace in 2018 than they have in previous years, those trends are not yet stopping Millennials from purchasing homes and putting down roots,” Joe Tyrell, executive vice president of corporate strategy for Ellie Mae, recently said in a statement.
Millennials aging into their thirties is poised to have a “profound impact” on the overall housing market.
Over the next 10 years, aging Millennials are expected to purchase “at least” 10 million new homes, according to Census Bureau and First American calculations. And by 2060, it is estimated they will have turned out more than 20 million first-time home buyers.