|Last week, Moody’s Investors Service (Moody’s) released a report projecting the impact a surge in millennial homebuyers will have on state Housing Finance Agencies (HFAs). Moody’s concludes that if home purchases by millennials were to increase by 20 percent, HFAs would originate an additional 12,800 loans for the sector and an average of 300 additional loans per year.
Moody’s believes there are several factors responsible for millennials increasing participation in the housing market. The Bureau of Labor Statistics found that millennials had the highest year-over-year percentage wage increase over the final quarter of 2014. Americans between the ages of 25 and 34 saw their median weekly earnings increase 6 percent as opposed to 1.7 percent for the overall population. The Urban Land Institute’s recently released survey found that 70 percent of millennials wish to own a home in the next 5 years. The report states that increasing wage levels and rising employment rates will allow many millennials to realize their homeownership dreams, despite unprecedented levels of student loan debt.
The report theorizes that HFAs are in a strong position to capitalize on the wave of millennial homebuyers that are prepared to entire the market because of programs targeting first-time homebuyers. HFAs are able to offer down payment and closing cost assistance programs to first-time homebuyers, making millennials a natural fit for HFA loans. Roughly 15 percent of millennial homebuyers financed 100 percent of the purchase price of their homes and Moody’s anticipates this number growing as more millennials become homeowners. 42 of the 44 HFAs Moody’s rates offer some form of down payment and/or closing cost assistance. For 30 of those HFAs, more than 50 percent of their loans include down payment assistance.