2020 could be the first year that millennials originate more than half of all home mortgages
A forecast from Realtor.com predicts that 2020 will be the first year millennials will originate more than 50 percent of all home purchase mortgages.
- Millennials will become a majority of mortgage originators more because they're aging into home-owning age, and not necessarily because of any changes in their economic status.
- The report also predicts that nationwide home price growth will come in at less than 1% in 2020, and sale volume will decrease by 1.8% to 5.23 million sales.
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Whether it is caused by student loan debt, an average net worth that's significantly lower than previous generations at their age, or simply a preference of renting over ownership, millennials have drawn a lot of attention for not buying homes like baby boomers did at their age.
But according to a forecast from listings site Realtor.com, 2020 will be the first year millennials will originate more than 50 percent of all home purchase mortgages.
Millennials will become a majority of mortgage originators more because they're aging into home-owning age, and not necessarily because of any changes in their economic status. Next year, 4.8 million millennials will turn 30, the largest cohort of the generation, and the oldest millennials will turn 39, an age range when historically people make their first home purchases.
And meanwhile the inventory shortage could be the most severe ever, especially among entry-level houses that attract first-time buyers. That may be offset by Gen X-ers who are looking to upsize from their first home, but not enough to meet demand. There has been an increase in construction of new homes, but most of these are more expensive homes that first-time buyers can't afford.
"2020 will prove to be the most challenging year for buyers, not because of what they can afford but rather what they can find," George Ratiu, senior economist at Realtor.com, said in a statement accompanying the report.
In a market that promises little increase in home value, the report predicts that baby boomers won't sell their homes, waiting for better returns on their investments. This will be compounded by growing economic uncertainty, which often leads homeowners to hold onto their homes for longer.
The report predicts that nationwide home prices will only increase 0.8% in 2020, and volume will decrease by 1.8% to 5.23 million sales.
In some areas, such as Chicago, San Francisco and Miami, home prices are predicted to actually decline, while mid-market areas, with lower prices, will attract homebuyers relocating from more expensive locations. The Midwest, South, and Southwest will likely be the destination for these migrations away from high housing costs.
According to Ratiu, another barrier for buyers will be "disciplined financial underwriting" which can prevent some homebuyers from getting a mortgage.
Meanwhile, some proptech companies that are attempting to open up home lending to more non-traditional buyers.
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