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In a previous blog, we introduced iEmergent’s First-time Homebuyer (FTHB) model and discussed our analysis and forecast of the FTHB market segment at the national level. In this blog, our focus will be on highlighting the results of our analysis at the market level and illustrating the critical importance of understanding how market characteristics affect lending strategy and performance.
Of particular interest to many lenders is the arrival of Millennial generation households to the prime home-buying stage of their lives. For this reason, our FTHB model has a Millennial households component to it as well.
We began analyzing the Millennial component of homebuyers three years ago when the oldest Millennials were turning 34 years old.* The analysis fit in nicely with much of the reported U.S. Census data on income and homeownership that uses “Under 35” as a key age grouping. For that reason, we have continued to define the Millennial component of homebuyers as those under 35, even though an increasing number of Millennials are technically now falling into the Census Bureau’s “35 – 39 yr. old” cohort.
No matter how the Millennial segment is defined, it is clear that the ability of Millennial households to buy homes varies sharply from one market to the next depending on their incomes and prevailing home values. Fortunately, there is enough good data on this type of information to reliably model this market segment.
The chart above shows iEmergent’s 2018 estimates for purchase loans and the share of those loans that will come from FTHBs and Millennials for the major Core-based Statistical Areas (CBSA) markets in the country. Some of the key results show that:
Without a detailed understanding of the demographics of homebuyers, it is difficult to design marketing plans that target important market segments like the Millennial segment. Analyses like these help focus attention on markets that provide the greatest opportunities for successful lending strategies.
* Demographic analysts William Strauss and Neil Howe originated the term “millennial” generation in 1987 and pegged the generation as those born from 1982-2004. Since then, analysts differ on when this generation should begin and end. We prefer Pew Research Center’s generation definitions, which place the Millennial generation births in the 1981-1996 range. However, a recent PwC report uses 1980-1995, while Gallup uses 1981-1995 and Ernst & Young uses 1981-1996 (the same as Pew’s range).