Millennials closed more purchased loans in December 2018, even in the face of higher-interest rates and fewer homes.

[caption id="attachment_9345" align="alignright" width="200"] Tyrell: Most Millennials were single when they bought homes.[/caption]

“Many Millennials are prioritizing homeownership and rather than being deterred by a tight market, they’re increasingly competing for available homes or moving to areas where inventory is more robust,” said Joe Tyrell, executive vice president of corporate strategy for Ellie Mae.

According to the latest Ellie Mae Millennial Tracker, share of purchase loans rose 4 percent, accounting for 88 percent of all loans closed by members of the generation in December, compared to 84 percent for the same month in 2017.

With interest rates for all 30-year loans reaching 5.12 percent on average, the highest since Ellie Mae began tracking this data in 2016, refinance rates dropped 5 percent year-over-year, comprising 10 percent of all closed loans in December 2018.

For all loans closed by Millennials in December 2018, 68 percent were Conventional, and 27 percent were Federal Housing Administration, Veterans Affairs were 2 percent, and other loans accounted for 3 percent. The share of Conventional purchase loans increased to 87 percent, from 80 percent, between December 2017 to December 2018.

“The average age for a Millennial homebuyer in December was 29.5 years old, the lowest for any month in 2018,” said Tyrell. “This may be driven in part by younger borrowers who no longer feel the need to wait for a typical life event like marriage before buying a home. In fact, from 2016 to 2018, 63 percent of borrowers between the age of 20 and 29 were single when they closed their loans.”

Other takeaways from the report, include the following:

• Thirty-year rates on both Conventional (5.09 percent) and Veterans Affairs (4.86 percent) loans reached their highest mark since Ellie Mae began tracking the data in 2016. Average FHA loan rates remained at their highest point in December at 5.18 percent, matching the average figure from November 2018.
• The average FICO score for Millennial borrowers on all closed loans dropped to 721, from 722 in December 2017.
• On average, all home loans closed in 43 days, the same as the previous year. Refinance loans closed in 46 days, up 1 day from 45 in December 2017. Purchase loans closed in 41 days in December 2018, compared to 42 days the previous December.
• Millennial males (both single and married) were listed as the primary borrower on 60 percent of closed loans in December. Women were listed on 32 percent and the remainder of closed loans did not specify primary borrower gender.
• For all closed loans in December 2018, 52 percent of Millennial borrowers were married while 48 percent were single. These figures were flat from December 2017.

The Fannie Mae Home Purchase Sentiment Index increased in January, rising 1.2 points to 84.7 and paring some of its recent losses-- and down 4.8 points compared with the same time last year.

The increase can be attributed primarily to an eight-percentage point jump in the net share of Americans who reported substantially higher household income today compared to this time last year.

“Movement among the HPSI components points to possible housing affordability relief at the start of 2019,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The net share of consumers expecting home prices to increase over the next year has declined further, falling to the lowest level since late 2012. Meanwhile, consumer perceptions of household-income growth have improved, with the net share noting rising income over the past year hitting a survey high." The HPSI distills data about consumers’ home-purchase sentiment from Fannie Mae’s National Housing Survey into a single number.

Other takeaways gleaned from the index are:

• The net share of Americans who say it is a good time to buy a home increased 4 percentage points from last month to 15 percent. This component is down 12 percentage points from the same time last year.
• The net share of those who say it is a good time to sell a home decreased 1 percentage point to 35 percent. This component is down 3 percentage points from the same time last year.
• The net share of those who say home prices will go up fell 1 percentage point to 30 percent, declining for the fourth consecutive month. This component is down 22 percentage points from the same time last year.
• The net share of Americans who say mortgage rates will go down over the next 12 months increased 3 percentage points to 53 percent. This component is down 3 percentage points from the same time last year.
• The net share of Americans who say they are not concerned about losing their job decreased 6 percentage points to 73 percent. This component is unchanged from the same time last year.
• The net share of those who say their household income is significantly higher than it was 12 months ago increased 8 percentage points to 27 percent. This component is up 11 percentage points from the same time last year.

“Furthermore, fewer consumers since last summer, on net, believe that mortgage rates will rise over the next year--a sentiment consistent with the Fed’s statement at its January meeting that it will be patient with future target rate adjustments,” said Duncan. “Overall, these results are in line with our forecast that, amid improving affordability conditions, home sales should stabilize in 2019 after declining last year for the first time in four years.”

The CoreLogic Home Price Index and HPI Forecast for December 2018 reported home prices rose on a year-over-year and month-over-month basis.

Home prices increased nationally by 4.7 percent year over year from December 2017. On a month-over-month basis, prices increased by 0.1 percent in December 2018.

Looking ahead, the CoreLogic HPI Forecast indicates home prices will increase by 4.6 percent on a year-over-year basis from December 2018 to December 2019. Comparing the annual average HPI and HPI forecast for 2018 and 2019, average price growth is forecasted to slow from 5.8 percent to 3.4 percent.

On a month-over-month basis, home prices are expected to decrease by 1 percent from December 2018 to January 2019. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.

“Higher mortgage rates slowed home sales and price growth during the second half of 2018,” said Frank Nothaft, chief economist for CoreLogic. “Annual price growth peaked in March and averaged 6.4 percent during the first six months of the year. In the second half of 2018, growth moderated to 5.2 percent. For 2019, we are forecasting an average annual price growth of 3.4 percent.”