It’s long been projected that Millennials are destined to dominate the housing market in upcoming years. Now, new data from Realtor.com reveals that it's finally happening. Millennials are buying houses. Lots of them.
According to Realtor.com, in January 2017, Millennials surpassed Generation X as the group that was responsible for the most new mortgages. Since then, Millennials' share of the mortgage market has continued to rise. By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers.
What's new is that Millennials also finally surpassed older generations in the total dollar amount of those mortgages. According to the data, Millennials now represent the largest dollar volume by age group as well.
"In November 2018, Millennials finally overtook Generation X as having the largest share of new loans by dollar volume, with a share of 42% in December, compared to a share of 40% for Generation X and 17% for Baby Boomers. This indicates Millennials are willing to take on larger mortgages than any other generation to fulfill their dreams of homeownership," the company writes.
Realtor.com's Director of Economic Research Javier Vivas said Millennials are getting older, with better jobs and deeper pockets, allowing them to expand their collective purchase power, and hence, their footprint in the market.
"The stereotype that Millennials primarily choose to buy homes and live in large metro areas isn't the reality," Vivas said. "Results show Millennials' expansion is more heavily conditioned by affordability than in prior years, so their eyes are set on less traditional secondary markets where homes and jobs are now available and plentiful."
According to the company, affordability is such a huge factor for Millennial homebuyers that many are moving to housing markets that previous generations considered less desirable, including Buffalo, New York. Interestingly, this metro is the top affordable market for Millennials.
“Within the last year, Millennials have moved to affordable areas with strong job markets where they have more buying power,” the company writes. “At the end of 2018, the median price of a mortgaged home purchased by Millennials was $238,000, $26,000 less than the median price of a home mortgaged by Baby Boomers and $51,000 than Generation X.”
Realtor.com notes in addition to increasing their buying power and taking on larger mortgages, data reveals Millennials have consistently made lower down payments than other generation since 2015.
In fact, Millennial down payments averaged only 8.8% in December 2018, compared to 11.9% for Generation X and 17.7% for Baby Boomers.
“Given that the majority of Millennial homebuyers are searching for their first homes and do not bring equity from a previous home, it's no surprise they are putting down smaller down payments,” Realtor.com writes. “This is likely a driver of their activity in more affordable markets, where their money goes further.”
NOTE: Realtor.com’s report is based on an analysis of a sample of residential mortgage originations from Optimal Blue.