In an environment of tight housing supply and rising home prices, millennial homebuyers are taking out increasingly larger loans backed by the Federal Housing Administration (FHA), according to the latest Ellie Mae Millennial Home Tracker, released Tuesday.
Millennials have taken steadily larger FHA loans over the past couple years, rising from an average of $170,167 in November 2016 to $178,862 in November 2017 and landing at $186,454 in November 2018, according to the latest data from Ellie Mae.
“We are seeing that as inventory remains relatively slim, borrowers are not waiting to buy an affordable home and are instead increasing their loan amount to purchase what is available on the market,” said Joe Tyrrell, EVP of Corporate Strategy at Ellie Mae.
The Ellie Mae report spotlighted a few metros where FHA loan size is on the rise, while asserting that, “Across the country, borrowers are taking out much larger FHA loans compared to previous years.”
In the San Francisco metro, FHA loans averaged $505,871 in November, compared to $460,853 a year ago. In Los Angeles, FHA loans averaged $442,569, compared to $389,031 last year.
Among FHA loans made to millennials, the large majority—95 percent—were purchase loans, while the remaining five percent were refinance loans.
FHA loans accounted for 26 percent of millennial loans in November.
Sixty-nine percent of loans made to millennials in November were conventional loans with an average loan amount of $211,268. Among those loans, 88 percent were purchase loans, and 11 percent were refinance loans. Two percent of millennial loans were acquired through the Veterans Administration in November. Across all loan types, the average mortgage loan made to a millennial in November was $192,570. Women made up close to one-third of millennial mortgage loans originated in November, while men accounted for 59 percent. Another nine percent were unspecified, according to Ellie Mae.
Millennial mortgage loan applicants were almost evenly split between married and single households with 52 percent identified as married and 48 percent as single. The average age of millennial mortgage loan applicants in November was 29.6.
Ellie Mae’s Milliennial Loan Tracker recorded an interest rate of 5.1 percent in November up from 4.96 percent a month earlier and 4.17 percent a year earlier. It took an average of 42 days for millennial loans to close in November.