Sometimes timing is everything.
When the real estate crisis of the 2007 Great Recession and its five-year aftermath hit America and the world, millennials (those born from 1981 to 1996) fell somewhere between pre-teens and young adults.
Undoubtedly, many millennia have borne the emotional scars of the Great Recessions when they saw their families or neighbors lose their shelter. They witnessed the humiliation their parents suffered as a result of being kicked out of the family sanctuary as a result of a short sale or foreclosure.
And then the family nest egg and all the equity in their home evaporated before their eyes.
How long after home values ââstabilized did it take millennials to feel secure enough to even consider the idea of ââhousing and investing called ownership?
The average millennial homeownership rate was 43% in 2019, 22% lower than the overall national rate, according to Freddie Mac’s 2021 Millennials and Housing: Homeownership Demographic Research.
Earlier this month, financial services firm Legal & General released Part Three of its Housing Study: Millennials in the United States and Homeownership: A Distant Dream for Most.
A survey of 900 non-homeowner millennials last spring shows that many millennials are discouraged by the prospect of homeownership. An overview of some of the findings:
- Almost two-thirds of millennials find cities unaffordable; 1 in 10 total abandoned property plans.
- Millennials generally view COVID-19 as the latest hurdle to a “raw deal” on affordable housing.
- The cost of renting is so high that home ownership has been put on the back burner.
- Among millennials living in the suburbs, 27% have completely abandoned their home ownership plans because of COVID.
- Thirty-six percent of Millennials find homeownership difficult where they currently live, and an additional 20% find homeownership where they live extremely difficult to afford.
- Thirty-three percent would move to a smaller city to find more affordable housing.
âThis study confirms that for most young adults, buying a home is an increasingly unattainable goal,â said Nigel Wilson, Managing Director of Legal & General. âMillennials we studied cited crushing student and medical debt and the inability of wages to keep up with the cost of living as exacerbating this generational problem of largely unaffordable housing. “
How can millennial home ownership become more accessible?
Brad Seibel, director of Sage Mortgage, has two great ideas. He believes first-time buyers should be allowed to opt out of a 401 (k) or other retirement account for their down payment without penalty. And Congress should allow tax deductions for employers who provide down payment assistance or monthly home payment assistance to their employees, he said.
Jim Gray, principal researcher at the Lincoln Institute of Land Policy, sees an opportunity for Fannie Mae and Freddie Mac to increase their purchases of home loans. These are loans granted on prefabricated mobile homes.
An April discussion paper, co-authored with George W. McCarthy, cites prefabricated housing as the cheapest type of home, costing 35-47% less per square foot than new or existing homes built on-site. Only 17% of new manufactured homes were real estate. The rest were household loans. Congress specified under the Duty to Serve Act authorizing Fannie and Freddie to purchase household loans.
My research online shows that mortgage terms are considerably higher than Fannie and Freddie’s rates at 6-9%. Fannie, Freddie, fixed mortgage rates are always plus or minus 3%.
I was able to find a low rate of 4.375% on a furniture loan for a well qualified borrower with 20% off at the community of Goleta in the West Bank.
âThey’re called trailers, mobile homes, modular homes and manufactured homes,â said Clay Dickens, senior vice president of Community West Bank. âThere are 1,500 mobile home parks in California, with an average of 60 to 100 units each. They go for $ 75,000 to $ 80,000 in the Inland Empire, for example.
Down payment tends to be the biggest hurdle to buying. Millennials or any other first-time buyer can visit www.downpaymentresource.com for a plethora of information on down payment assistance programs available across America.
Finally, change the rules for points and fees.
Federal law prohibits loan origination fees of more than 3% of the amount financed. This 3% rule includes Fannie or Freddie markups and the lender’s sales charge. This cap often makes the incentive to pay loan officers untenable. Or it creates a mathematically impossible number for issuing small loans of about $ 150,000 or less.
Freddie Mac Rate News: The 30-year fixed rate averaged 3.14%, 5 basis points higher than last week. The 15-year fixed rate averaged 2.37%, 4 basis points higher than last week.
The Mortgage Bankers Association reported that the volume of mortgage applications was unchanged from the previous week.
At the end of the line : Assuming a borrower got the 30-year average fixed rate on a compliant loan of $ 625,000, last year’s payment was $ 11 less than this week’s payment of $ 2,682.
What I see: Locally, well-qualified borrowers can get the following fixed rate mortgages without points: 30-year FHA at 2.375%, 15-year conventional at 2.375%, 30-year conventional at 2.94%, conventional high 15-year balance ($ 625,000 to $ 822,375 for most lenders) at 2.5%, a conventional high 30-year balance at 3.125% and a fixed 30-year jumbo at 3.625%.
Eye-catcher loan of the week: A fixed rate fully amortized over 10 years at 1.99% with a cost of 1 point.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] Its website is www.mortgagegrader.com.