Millennials are now the plurality of the home-purchase market, making up 43% of all buyers, according to the National Association of Realtors. As the generation that came of age during the Great Recession found its feet in the housing market, tech-savvy millennials shifted mortgage processes by pushing for digital applications and verifications. Some of these digital natives became mortgage originators, and they have a fluency in social media and digital tools that makes them attractive to clients and employers alike.
Affordability rules for youngest buyers
Generation Z home shoppers are receiving more mortgage offers in affordable U.S. metro areas, particularly those in the Midwest and South regions, according to a May 2022 report from LendingTree. The most popular metro was Salt Lake City, where 16.6% of all mortgage offers in 2021 were made to Gen Z borrowers.
The Utah capital was followed by Louisville, Kentucky, and Oklahoma City, where more than 15% of mortgage offers last year involved members of Gen Z. Cincinnati and Indianapolis filled out the top five. The least popular metros for Gen Z buyers were expensive coastal cities. In San Francisco, New York City and San Jose, less than 5% of mortgage offers went to Gen Z buyers. Los Angeles and Boston were the other cities in the bottom five.
This marks a major departure from the previous generation of homebuyers. Millennial homebuyers prefer major and more expensive metros, according to LendingTree, which used the same methodology earlier this year to analyze millennial buyer behavior. The top three metros in 2021 for mortgage offers to millennials were Denver, Seattle and Boston. This age group received more than 60% of all loan offers in these metros.
Mortgage payments are rising sharply
Although mortgage interest rates softened slightly and briefly this past June after a sharp increase since the start of this year, they remained well above the 5% mark, according to Freddie Mac data. The leveling off was good news for mortgage affordability, which has been steadily decreasing as home prices, inflation and interest rates rise.
Homebuyer affordability decreased in April 2022, according to a Mortgage Bankers Association (MBA) analysis of payments sought by loan applicants. The national median monthly payment for applicants rose to $1,889, up 8.8% from the $1,736 figure in March. MBA’s updated forecast predicts that rates will remain above 5% for much of the year but calls for deceleration of home-price appreciation.
The trade group’s index revealed that purchase loan application payments were highest in Western states. Idaho topped the list, followed by Nevada, Arizona, California and Utah. The states at the bottom of the list (indicating better affordability) were Connecticut, Louisiana, Alaska and Wyoming.