Experian data reveals mortgage debt by the generations

by Kimberly Greene16 Aug 2019

Mortgage debt may be thought of as good debt, but even good debt can be concerning.

Millennials are racking up mortgage debt and are on pace to hold more average mortgage debt than any of their predecessors, according to a study by credit reporting company Experian. In the first quarter of 2019, millennials held an average of $222,211 in mortgage debt, a 5% increase from Q1 2018. It is one of the largest mortgage debt increases seen by any generation in the past year.

Millennials now have the second-highest average mortgage balance of any generation. Generation X, people between ages 39 and 54, held the highest average mortgage balances of $237,753 in Q1 2019—but the balances of the younger generation are quickly closing in on that gap.

In some respects, that’s not surprising, as millennials haven’t had as much time to pay down mortgage debt, and older millennials in particular may be at the stage where they’re moving on from their starter homes. The majority of Generation-Xers, on the other hand, may have already made that transition; the year-over-year change for their average mortgage debt was 2%.

Members of Generation Z, those age 22 and younger, who had the lowest average mortgage balance of any generation in Q1 2018 at $120,209, saw their average balances increase by 15% to $138,193 since Q1 2018. The silent generation now carries the lowest average mortgage balances, at $131,658 in Q1 2019.

Of course, mortgages and real estate are ultimately a local phenomenon. Washington, D.C., has the highest mortgage debt in the country. There, millennials carried an average mortgage balance of $450,985 in Q1 2019, according to Experian data. That's more than double the national average of $202,284 and slightly higher than Washington, D.C.’s average of $416,848 across all generations.

In addition to having the highest mortgage balances, Washington, D.C., was among the top 10 states with highest millennial credit scores. Millennials in the state had an average FICO score of 698, which is a few points shy of the national average of 703, but significantly higher than the 667 average held by millennials nationally.

Hawaii, California, Massachusetts, and Washington rounded out the top five states with the highest mortgage debt.

The average lowest mortgage balance, $121,059, was held by millennials in Puerto Rico. The other four states with the lowest average mortgage balances were West Virginia, Indiana, Arkansas, and Ohio. These states also held some of the lower average FICO scores in the US—West Virginia had an average score of 640 and Puerto Rico's had an average of 657.

This is part of Experian’s larger look into mortgage debt nationwide.

Outstanding mortgage balances increased for the seventh straight quarter, reaching a new high of $9.5 trillion, according to Experian data from the first quarter of 2019. That figure is well above the outstanding balances reported during the peak of the mortgage crisis in 2008. For context, the median sales price of homes sold in the United States in Q1 2008 was $233,900, and the median sales price of homes sold in the United States in Q1 2019 was $313,000, according to data from the Federal Reserve Bank of St. Louis.

“While mortgage debt numbers could be a cause for concern as buyers increasingly leverage their finances to purchases homes, other signs show they are more responsible with their mortgage debt than in years past. And for consumers just starting their homebuying search, low interest rates and available inventory could make their search more rewarding, depending on local market conditions,” the report reads.

Debt may be up, but delinquency rates are down. “Since 2009, payments made between 30 and 59 days late have decreased 61%. There were declines across the board, with the exception of a small increase this past year for payments 30 days late.”

The report also adds that the Mortgage Bankers Association (MBA) forecasts interest rates to stay below 5% in 2019, expecting 30-year mortgage rates to average 4.3% during Q2 2019 and remain around 4.4% through the second half of 2019.