CHM Blog

Homebuyers Under 25 Are Flocking To The Midwest

The newest generation of homebuyers are flocking to the Midwest.

Cities with the most homebuyers under the age of 25 are located in this more affordable part of the country, a new study released by Construction Coverage found.

The study used data from the Federal Financial Institutions Examination Council’s 2022 Home Mortgage Disclosure Act, and researchers at Construction Coverage "calculated the share of all home purchase loans taken out by applicants under 25 years old."

The study says that only "conventional home purchase loans originated in 2022 were considered for this analysis". The key points of the study found:

• The total number of conventional home loans originated in 2022 was down across all age groups from the year prior. Among all age cohorts, 65–74 year-olds experienced the largest percentage decline, decreasing by 22.3%. Notably, the under-25 age group only experienced a 12.3% decline, the smallest of all cohorts and a sign of persistent housing demand from younger generations despite economic headwinds.

• Many of the states with the highest shares of home purchase loans from adults under age 25 are found in the more affordable Midwest, led by Iowa at 11.5%. The same trend holds at the local level, with many of the top metropolitan areas for young homeowners also found in that region.

• In contrast, high-cost coastal states including Hawaii (1.6%) and California (1.9%) have much lower shares of home purchase loans from young adults. In these areas, would-be young homebuyers face more expensive homes and higher living costs, creating a higher barrier to entry in these real estate markets.

As the study notes, millennials—those born from 1981 to 1996—now representing the largest age group in the United States and entering their prime years for acquiring their first or even second homes. These dynamics contribute to a surge of buyers vying for a diminishing pool of available properties. Freddie Mac reports that even before the pandemic hit, the housing market was facing an all-time low in supply.

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Higher

Mortgage rates are under heavy pressure today. The MBS market improved by +27 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

Three Things: These are the three areas that can have the greatest impact rates this week. 1) Geopolitical, 2) The Fed and 3) Domestic News.

1) Geopolitical: The developing story out of Israel and the military escalation on multiple fronts will continue to dominate both the news and the bond markets. The UAW strike(s) are also a concern for markets.

2) The Fed: We have a ton of Fed speak this week as we near next week's media blackout from the Fed ahead of the November FOMC meeting.

10/16 Harker

10/17 Williams, Bowman, Barkin

10/18 Waller, Williams, Bowman, Harker, Cook and the Fed's Beige Book

10/19 Jefferson, Powell, Goolsbee, Barr, Bostic, Logan and Harker

10/20 Harker and Mester.

3) Domestic News: The biggest domestic economic report of the week is Tuesday's Retail Sales data

Treasury Auction: We have an important 20 year Treasury Bond auction on Wednesday.

This Week's Potential Volatility: High

This morning markets are under heavy pressure. Volatility has started high and will remain that way on geopolitical news and Fed speak.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

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