Limited credit access, lower income drive millennial-Gen X mortgage gap

Despite mortgage challenges, almost three-fourths of millennials still plan to buy a house in the future

Limited credit access, lower income drive millennial-Gen X mortgage gap
Limited access to credit and affordability challenges due to lower income levels are influencing the mortgage activity of millennials compared to Generation X consumers when they were that age, according to a TransUnion study.

Among millennials aged between 21 and 34, only 5% have opened mortgages, compared to 10% among Gen-X consumers at that age. The study also found that within the super-prime risk tier, only 13% of millennials opened a loan, compared to 16% for Gen X, indicating that the mortgage gap is not influenced exclusively by credit supply.

“The mortgage market during most of the last five to seven years has been a difficult one for millennials because of a challenging labor market for that age group, combined with stricter underwriting post-recession,” said Nidhi Verma, co-author of the study and vice president in TransUnion’s innovative solutions group.

Access to mortgages fell dramatically for those aged 21 to 34 from 2000 to 2016, according to the study. Non-prime borrowers in the age range made up 39% of all originations in 2000, with this figure falling to 20% in 2016.

Aside from access issues, lower income levels for millennials further impact mortgage origination to the demographic. In 2000, consumers between 25 to 34 years old had $60,000 in median household income. This figure falls to $57,000 in 2015.

In spite of these challenges, almost 75% of millennials ages 23 to 37 still plan to buy a home in the future. “Millennials clearly are interested in home ownership, and we think their appetite to secure a mortgage loan will increase as their incomes rise,” Verma said.

TransUnion said that the mortgage market continues to lag all major credit products in terms of recovery from the Great Recession, with homeownership levels remaining below rates recorded in 2009. Since the recession, homeownership is down 0.8% overall, with homeownership among 35- to 44-year-olds down by 1.6% and among those under 35 down by 2.1%.

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