The number of refinances closed by millennials fell in November 2019 as interest rates on 30-year loans rose, according to Ellie Mae. Thirty-one percent of loans closed by millennials were refinances—down 3% from the prior month.
This is the first month-over-month decline in the share of refinances since May 2019.
For all loans closed by millennials, the average interest rate was 3.95%, which is up from October’s 3.90%. Rising interest rates brought a month-over-month decline in refinances in several large metros: Los Angeles, California (56% to 50%); Chicago, Illinois (43% to 38%); Austin, Texas (32% to 26%); Miami, Florida (28% to 22%); San Francisco, California (51% to 48%); and Dallas (30% to 26%).
“Millennials are well-educated on their options as homeowners and have played a major role in driving the refinance market in 2019,” said Joe Tyrrell, COO at Ellie Mae. “Interest rates increasing in November for the first time this year may indicate that the refinance boom has passed its peak, however, rates are still relatively low and refinance share is up 21 percentage points year-over-year.”
While the refinance share fell, purchase activity rose. The time to close on all purchase loans increased from 41 days to 42 days month-over-month. The time to close on all refinance loans rose to 45 days from 44 in October.
“For millennials, 29 and 30 are prime homebuying ages and millions of millennials will reach this marker next year,” said Tyrrell. “Millennials expect a balance of automation and human touch in the mortgage process and as their purchasing power continues to grow, it’s important that lenders invest in technology to meet this demographic’s expectations.”
A report by Clever found 84% of millennials in 2019 considered homeownership a major part of the American Dream. However, many still struggle to accomplish that dream.
While Clever states that millennials made up 45% of homebuyers in 2018, a study by the Urban Institute says that 10% fewer millennials own homes than their Generation X and Baby Boomer counterparts at the same age.
Money is still the primary barrier for homeownership. Clever says that more than 25% of millennials planning to buy a home in 2020 have less than $1,000 savings. Also, 25% of millennials have more than $10,000 in debt but still plan to spend more than $200,000 on a new home.
Seventy-percent of millennials plan to put down less than 20% on their new home.