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Mortgage

This generation is the most willing to do whatever it takes to buy a home

Hint: It’s not Millennials

First-time homebuyers are motivated to buy a home, with about 60% saying they would relocate to another city or state if the cost of a home was lower than their current location.

So which generation was the most willing to move? Surprisingly, it wasn’t Millennials. Actually, Gen Z, the generation that comes after Millennials born between 1996 and 2010, being the most apt to move at 70%, according to a new analysis from TransUnion.

In fact, Millennials didn’t even come in second. Gen Xers, born between 1965 and 1980, were the second most likely to move in order to buy a home at 65% and Millennials, born from 1981 to 1995 came in third at 61%, Joe Mellman, TransUnion senior vice president and mortgage business leader, said in an interview with HousingWire.

The next three years are expected to produce more first time homebuyers than any point since the recession. The next three years, from 2020 to 2022, TransUnion analysis predicts the market will see at least 8.3 million new first time homebuyers, which could climb as high as 9.2 million if economic growth exceeds expectations. This is a significant increase from the 7.6 million first time homebuyers from 2016 to 2018.

“While we’ve recently seen a boom in refi activity, actual homeownership rates are down,” Mellman said. “Challenges have included high home prices, sluggish wage growth and limited housing inventory.”

“But we may be starting to see daylight as slowing home price appreciation, low unemployment, increased wage growth and low interest rates are helping affordability,” he said. “As a result, we are optimistic that first-time homebuyers will contribute more to homeownership than at any time since the start of the Great Recession.”

The top motivators for purchasing a home included seeking more privacy at 45% and wanting to build equity and wealth at 44%. Fewer respondents said it was from life events such as getting married at 24% or expanding their family at 23%.

Homebuyers continue to get younger as the median age of first time homebuyers dropped from 39 in 2010 to 36 in 2018, the study showed. And consumers aged 25 to 34 have seen their share of first time homebuyers rise by 6%.

“There has been a lot of discussion in the marketplace that younger people today may not be as interested as prior generations in buying a home and being tied down to one location,” Mellman said. “Our survey results suggest that is not the case at all.”

“Rather, younger people may have in fact been deterred from home purchase by challenges they faced in the financially difficult times of the last decade,” he continued. “Only 10% of respondents said being tied down to one location would be a reason to delay home purchase. Just like others before them, the younger generation seems to place value in homeownership.”

Actually, Mellman explained to HousingWire that this presents a great opportunity for lenders, especially as the refi boom slows in 2020, to reach out to and educate young homebuyers.

The top reason for delaying home purchases were down payments or monthly payments at 58%. But a lot of respondents, about 51%, said they thought they would need to come up with a 10% to 20% down payment. Many had never heard of Fannie Mae and Freddie Mac’s low down payment options, or of the Federal Housing Administration. They also believed their credit score was too low, but further analysis showed these potential homebuyers had scores high enough to at least qualify for an FHA loan.

“Many of our potential first-time homebuyer respondents don’t seem to be aware of the wide variety of financing options available to them,” Mellman said. “It suggests there’s a large opportunity for lenders to proactively identify consumers who are interested in becoming first-time homebuyers and then educating them on options they may not be aware of. Consumers may find homeownership programs that are more flexible than they originally thought, and lenders in turn can gain new customers.”

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