Ellie Mae: Millennial purchases keep soaring

The tight housing inventory across the country is not abating millennial buyers one bit. Purchase activity continues to rise, with 61% of all purchase loans closed in July going to millennials, according to Ellie Mae Millennial Tracker

Driven by low interest rates, the five percentage-points increase compared to June, marks “the highest purchase share for the generation since March 2020,” Elle Mae said.

In July, the average interest rate for all loans closed by this demographic fell to 3.25%, the lowest since Ellie Mae began tracking this data, the report notes, boosting millennials’ purchasing power, especially for younger millennials born from 1991-1999. 

“We’re seeing a new wave of younger millennial home buyers flood the market as we enter peak home buying season,” said Ellie Mae COO, Joe Tyrrell. “With interest rates at historic lows, now is the perfect time for younger millennials to purchase a home and start building equity.”

The younger millennial sub-group, aged 20-30 years old, “was responsible for the most closed purchase home loans for the month.” Up to 81% of loans closed by younger millennials were for purchases.

Younger millennials took advantage of Federal Housing Administration loans in July, as up to 97% of closed FHA loans for purchases were for younger millennials, “the highest percentage since Ellie Mae started tracking this data in 2016.”

By contrast, since many older millennials, now 30-40 years-old, already own homes, 53% of their loans were for purchases, of which up to 92% also were FHA loans – while the remaining 46% of loans closed by this group were for refinances, the report found.

As to July’s FICO score averages, for younger millennials the average FICO was 728, compared to 747 for older millennials, so the overall average FICO score for all millennial loans closed was 739.

“To encourage homeownership among the millennial generation, especially younger millennials, it is imperative lenders educate these borrowers on all loan types, including affordable options with less stringent credit requirements such as FHA loans,” added Tyrrell.

The report mines data from a sampling of approximately 80% of all closed mortgages dating back to 2014.

Berkadia acquires LIHTC Advisors, expands AH goal

Despite the downward effect of COVID-19, according to industry data, underlying affordable housing demand supports the multifamily sector, especially its small multifamily asset subsector, which has performed well during the first half of the year, keeping investor interest strong. 

Berkadia, a joint venture of Berkshire Hathaway and Jefferies Financial Group that provides commercial real estate lending, servicing and brokerage services, announced the acquisition of LIHTC Advisors, an Idaho-based brokerage firm dedicated to providing full-service solutions for apartment investors, and focuses on Low Income Housing Tax Credit (LIHTC) “and other affordable housing properties,” Berkadia said.

“This is a huge step forward in Berkadia’s goal of expanding our affordable housing team, another investment in this critical space,” said Justin Wheeler, CEO of Berkadia, a commercial real estate (CRE) lender, servicer and broker that specializes in this asset class.

Former principals with LIHTC Advisors, Jeff Irish and Brandon Grisham, and their team of LIHTC Advisors’ brokers and technical analysis, marketing and sales experts also joined Berkadia. 

Irish and Grisham have been involved in the sale of over $2 billion of affordable housing assets nationwide, according to a press release. In 2019, they closed 53 transaction and reportedly, expect to exceed that milestone in 2020. Both principals have been in the affordable housing brokerage business for a combined 19 years, representing both general and limited partners.

In 2019, Berkadia’s loan origination volume was $27 billion, while its investment sales platform totaled $9 billion. “Jeff, Brandon and their team bring a long and successful record of providing excellent advisory and client service,” said Wheeler.

The merger investment aims to advance Berkadia’s strategic growth initiative in the affordable business and support long-term strategic growth under the leadership of SVP and head of Berkadia Affordable, David Leopold, who joined the company in 2019.  

Leopold leads the strategy of Berkadia Affordable’s mortgage banking, investment sales and recently integrated tax credit syndication teams, which together deliver capital and advisory services to support Berkadia’s affordable housing clients, the company said.

“We are thrilled to be adding such skilled affordable experts to further our goal to be the largest and most respected provider of capital and advisory services for affordable housing in the country,” said Leopold. “Jeff, Brandon and their entire team bring our suite of services and market presence to a new level.”

Parents face tough financial decisions

This year’s unusual back-to-school season is posing multiple challenges to America’s parents. Changes to childcare, food, internet service, and needs vital to the family wellbeing, as well as adult age children moving back home, are forcing parents to make difficult decisions. 

A COUNTRY Financial Group survey reveals 51% of parents with children under 18 are facing additional financial concerns this year. Due to the pandemic, 21% of parents already have had to change, reduce work hours, even quit their job (7%), to accommodate changing school or childcare options. Another 8% lost their jobs because of childcare issues.  

Comparatively, 22% of parents reported that COVID-19 affected their ability to pay bills, compared to 12% of non-parents. For example, 27% of parents had to delay paying at least one of their basic payments (rent, credit card bills, auto insurance, retirement contributions), compared to 17% of non-parents.

“Parents are being forced to make financial decisions that were not a part of their plan before the pandemic hit,” said Troy Frerichs, vice president of investment services at COUNTRY Financial. “Now, they’re faced with the possibility of leaving a job or reducing their work hours to home-school or help their kids with remote learning… and create a new game plan.”

The survey found parents of children learning remotely this fall face unique back-to-school season expenses. Up to 26% of parents worry about increased food costs, 21% about the cost of new technology and internet services, and 13% about higher childcare expenses. At 68%, most parents estimate remote learning will add about $500 in monthly costs.

One third, or 34% of parents with children attending classes virtually this fall worry about the cost of food, compared 19% of parents with children attending school in-person. 

Parents with children under the age of ten are even more worried, 19% said their main concern is higher childcare expenses, while another 18% of them fear they have to change or reduce work hours.

Since schools and local governments decide whether children will be learning in-person or virtually this fall, parents feel they have lost control, continued Frerichs. “My challenge to parents is to sit down and create a new plan addressing their most important needs such as managing day-to-day cashflow and affording everyday expenses first,” and pause long-term plan savings such as retirement or college funds.

The survey also found parents with adult children, age 18 and older also feel pandemic related financial strains. 

One in five or 21% of these parents had a college-aged or older child move back in with them during the pandemic. Up to 50% are helping their adult children pay everyday expenses including cell phone bill, gas or groceries, 21% pay healthcare costs, and 11% help them pay rent or mortgage expenses.

Compiled by independent research firm Ipsos, the COUNTRY Financial Security Index based on responses from nearly 1,330 U.S. adults has a margin of error of +/- 2.71%. Since 2007 it has measured Americans’ sentiments of their personal financial security and issues affecting their finances. 

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