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A Look at Millennial Home Buying Trends in Washington State

A new report from the mortgage software company Ellie Mae sheds light on millennial home buying trends in Washington State and across the nation.

At 92 million strong, millennials (born between 1980 and 2000, roughly) are the biggest generation in U.S. history. So they make up a large portion of the real estate market as well. This generation is poised to reshape the economy, and possibly the housing market as well.

A Driving Factor in the Real Estate Market

According to Goldman Sachs Global Investment Research: “As Millennials enter their peak home-buying years, their reluctance to enter the housing market could change. The cohort’s sheer size, plus its desire to settle down in the future, could lead to a surge in home sales.”

Millennials are a driving factor in the Washington State real estate market as well, particularly in the Seattle area. According to a recent report by the Urban Land Institute, Seattle is one of the top 20 cities in the U.S. where millennials are moving. Within Seattle, the size of this demographic increased 5.2% from 2010 to 2015.

This influx brings more home buyers into the Washington real estate market, which in turn puts upward pressure on home prices. Especially at a time when housing inventory is limited.

Home Buying Trends Among Washington Millennials

In September 2017, the mortgage software company Ellie Mae published new findings from its Ellie Mae Millennial Tracker™. Among other things, the report showed that the average time to close a loan for millennial borrowers was 44 days. (But this can vary due to a number of factors.)

Here are some other millennial home buying trends in Washington and nationwide:

  • In July of this year, refinance loans increased to 11% of all closed loans (issued to millennials borrowers). Purchase mortgage loans for home buyers accounted for 89%. So clearly, the mortgage market is still “buyer heavy,” particularly among millennial borrowers.
  • The average mortgage rate for a 30-year loan hit a year-to-date low in July, dropping to 4.18%. Rates have dropped even further since then, according to the latest data from Freddie Mac.
  • Conventional home loans (which are not insured by the government) were the most popular financing option for millennial home buyers. Conventional loans for this group accounted for 64% of total activity, while FHA-insured mortgages came in at 32%. VA loans for military members and veterans held steady at 2% of volume, nationwide.
  • FICO credit scores across all loan types rose slightly in July to an average of 724. For millennials buying a home, the average FICO score was 748 for a conventional loan, 688 for an FHA, and 742 for the VA program. (Note: These are just averages. It’s possible to qualify for a mortgage with a score below this level.)

Student Loan Debt Less of an Issue?

According to the Institute of Politics at Harvard University, 42% of millennials report that they or someone in their household has student load debt.

In some cases, excessive debt can make it harder for a person to buy a home because of mortgage qualification rules. But we have seen some easing on this front.

In a recent blog post, we explained that a policy change made by Fannie Mae could make it easier for millennials with student loan debt to qualify for mortgage financing. Specifically, the change increases the debt-to-income ratio limit for borrowers from 45% to 50%. In other words, millennial home buyers could qualify for mortgage financing with higher debt levels than in the past.

According to a related news release from the company, this change “will result in more loans with [debt-to-income] ratios between 45 and 50 percent receiving an Approve/Eligible recommendation” from their underwriting program.

Need a loan? Sammamish Mortgage has been helping Washington home buyers with their mortgage financing needs for more than 20 years. Please contact us if you would like to receive a rate quote, or if you have questions about qualifying for a home loan!

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