Photo: Robert Clark

The US housing market continued to tighten in October, forcing some Millennial prospective homebuyers to adjust their expectations, according to the latest Millennial Tracker from Ellie Mae.

“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,” said Joe Tyrell, executive vice president of corporate strategy for Ellie Mae, in a statement.

Interest rates rose to 4.96 percent in October, the highest percentage point since Ellie Mae started tracking this data in 2016. October’s reading was up from 4.87 percent in September, and up from 4.13 percent a year ago.

Despite the bump in interest rates, purchase loans accounted for 88 percent of closed loans to Millennial borrowers in October, four percentage points higher than a year ago. Of all closed loans to Millennials in October, 68 percent were conventional loans, while 27 percent were for FHA loans — mortgages insured by the Federal Housing Administration.

“It is important for lenders to educate Millennials on the value of FHA loans that bring lower down payments and can allow these new homebuyers to stretch their dollar a little further even with rising interest rates,” says Tyrell.

On average, the Millennials that were buying homes in October bought cheaper homes.

The average loan amount to Millennial borrowers for all closed loans was $189,686 in October, down from $192,005 in September. This was still higher than October 2017’s average of $186,567.

When men were listed as the primary borrower, the average closed loan amount in October was $198,864, compared to $188,607 when women were the primary borrower.

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. (The remainder did not specify a gender.)

Meanwhile, the average FICO credit score for Millennial borrowers remained flat for the third consecutive month at 722, slightly down from 723 in July. And the average age of all Millennial borrowers held at 29.7 from the previous month — essentially flat from 29.3 in October 2017.

The Ellie Mae Millennial Tracker focuses on Millennial mortgage applications during specific time periods. Ellie Mae defines Millennials as applicants born between the years 1980 and 1999.

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