A significant number of millennials aspire to become homeowners within the next five years, according to a recent survey, despite income and student debt burdens.
Up to 35% of more than 1,000 millennials, born between 1977 and 1995, who participated in a national survey commissioned by loanDepot LLC, a nonbank lender in Irvine, Calif., said they are taking action now so they can fulfill that dream.
Survey findings indicate for nearly 29% of survey participants it will take a 15% or less annual income increase to become homeowners for the first time. Granted they earn $73,600, the median household income for college-degreed adults, according to the survey, these millennials need an additional $11,040 a year to qualify for a median priced home of $219,800 — which would result in approximately 449,500 more homes sold, at a total of $94.4 billion.
So to be able to succeed millennials are taking action today as more than half are getting their credit in order, 47% are paying down debt, and up to 47% of survey participants also are saving for a down payment.
The survey confirms income is a key to opening the doors of homeownership, Anthony Hsieh, chairman and chief executive officer of loanDepot, said in a press release. "Their strong desire to become homeowners, coupled with the commitment of getting their finances in order, suggests a renewal in first-time buyer demand may be possible if we sustain the necessary economic and market conditions."
The online survey, conducted by GFK Custom Research North America, also confirms that the second biggest bump on the road besides income is
The survey shows 48% of millennials find student debt should not have "equal weight with credit card or consumer debt during the home loan application process." More than half said the federal government should make it easier for creditworthy borrowers with student debt to qualify for a mortgage loan, compared to 14% who opposed government intervention.
Furthermore, millennials suggested student debt should be treated similarly to medical debt when calculating their credit score, similar to the recently introduced FICO 9, which reduces the importance of medical debt on a borrower's credit score. (Currently FICO 9 has not been adopted by the housing industry and government-sponsored enterprises). Millennials in the survey also think mortgage lending guidelines are too strict and suggest the federal government has to find ways to make it possible for low- and middle-income people to access credit.
"We're at a tipping point," Hsieh said. "Lenders, regulators, legislators and investors need to remove the unnecessary and unfair barriers blocking millennials from homeownership."
Of the millennials with student debt, 40% say they plan to purchase a home within five years. Almost half believe the average borrower needs to lower their total monthly debt payments by more than $300 to qualify for a home loan. But an analysis of loanDepot data of 46,000 first-time home buyers from 2010 to 2014 shows, however, that — depending on their debt-to-income ratio — the average borrower with student debt needs to reduce the total monthly payments by $150 to $300 to qualify for a mortgage, according to the release.
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