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Are Millennials Mortgage-Ready?

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Millennials, now the largest living generation, are coming of age and entering those big life moments. College graduations, first jobs, getting married and moving out. But what about home ownership? Do Millennials want to buy real estate? Can they? This presentation reveals new insights pulled from both Experian and Freddie Mac.

Published in: Economy & Finance
  • The greatest take away for me is that 67% of Millenials have no student loan debt burden as presented by Freddie Mac and Experian.
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Are Millennials Mortgage-Ready?

  1. 1. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Are Millennials Mortgage-Ready?
  2. 2. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. Introducing:  Cindy Waldron Freddie Mac  Renae Sherman Experian
  3. 3. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 3 Millennial population growth
  4. 4. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 4 Millennials Millennials Surpassed the Baby Boomer generation in 2015 75M individuals strong 75% say homeownership is a long-term goal 60% have plans to buy a home in the future
  5. 5. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Research data overview
  6. 6. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 6 Research data overview  Obtained 10% sample of Experian File OneSM consumer credit database  VantageScore® 3.0 credit score  Premier AttributesSM v1.2  Income InsightSM and Debt-to-Income InsightSM Matched to Experian ConsumerViewSM marketing database  Age  Education  Individual and household-level demographics Data summary
  7. 7. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 7 Data summary Mortgage readiness – underwriting criteria: Strong  VantageScore® 3.0 greater than 737  Total DTI < 45% Moderate  VantageScore® 3.0 between 661 and 736  Total DTI < 45% Weak  VantageScore® 3.0 less than 661 AND / OR  Total DTI > 45%  Foreclosure in the past 84 months  Bankruptcy in the past 12 months  Severe delinquency (120-180 DPD) in the past 12 months  No foreclosures in the past 84 months  No bankruptcies in the past 12 months  No severe delinquencies (120-180 DPD) in the past 12 months
  8. 8. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 8 Data summary 8 Total sample 11,598,718 678 AVERAGE Millennial 30.4% Non- Millennial 69.6% Mortgage readiness 18.3% Strong 13.9% Moderate 30.8% Weak 30.8% Have mortgage trade on file 3% Unscoreable
  9. 9. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 9 Generational review Gen X Ages 35-51 Baby Boomers Ages 52-70 Silent Ages 71+ Millennials Ages 18-34
  10. 10. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 10 600 650 700 750 800 850 10 Millennials Ages 18-34 Gen X Ages 35-51 Baby Boomers Ages 52-70 Silent Ages 71+ Average VantageScore 3.0 credit score By generation 713 740 636 665
  11. 11. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 11 Millennial characteristics Millennials AGE 26.3 years $50,908 636 14% $4,002 64% AVERAGE INCOME AVERAGE AVERAGE PERCENT WITH A MORTGAGE AVERAGE REVOLVING CARD BALANCE STUDENT LOAN DEBT AS A PERCENTAGE OF TOTAL DEBT (for those with student debt)
  12. 12. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 12 How many Millennials are Mortgage Ready? Millennials Strong 14% Moderate 19% Weak 50% Have a mortgage 14% Unscorable 3% 24,508,934 Strong + Moderate Mortgage Ready Millennials 19% 23% 22% 26% Age Distribution of Weak Segment: 18-21 22-25 26-29 30-34 29.1% 70.5% Near-Moderate in Weak Segment: 601-660 < 601 >660 VantageScore® 3.0 range:
  13. 13. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 13 Do income and education level indicate Mortgage Readiness for Millennials? Education level Average Income Insight 0% 20% 40% 60% 80% 100% Weak Moderate Strong Have a Mortgage Graduate Degree Undergrad Degree Some College (incl trade school or current student) High School Less than High School $35,435 $49,164 $73,823 $87,188 $0 $20,000 $40,000 $60,000 $80,000 $100,000 Weak Moderate Strong Have a Mortgage
  14. 14. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 14 Millennial student loan impact Monthly student loan payment and % of gross monthly income Student loan balances by segment 67% 33% No Student Loans 1+ Student Loans 0% 25% 50% 75% 100% Weak Moderate Strong Have a Mortgage $1k-$5k $5k-$10k $10k-$20k $20k-$40k $50k+ $202 $240 $304 $279 $0 $50 $100 $150 $200 $250 $300 $350 Weak Moderate Strong Have a Mortgage 0% 25% 50% 75% 100% Overall balances Student loan debt burden 6.8% 5.9% 4.9% 3.8%
  15. 15. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 15 Where do Millennials live?
  16. 16. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 16 Where do Mortgage Ready Millennials live? - Freddie Mac Borrower Help Center
  17. 17. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 17 Do Mortgage Ready Millennials live in affordable areas? - Freddie Mac Borrower Help Center
  18. 18. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Opportunities
  19. 19. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 19 - Freddie Mac Borrower Help Center Where should lenders focus to serve potential Millennial home buyers?
  20. 20. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 20 What factors predict Millennials home purchase likelihood? Logistic Regression Analysis  Gender  Number of children  Education  Housing stock  Local economic factors  VantageScore® 3.0  Age  Student debt  Credit card debt  Auto loans  Income  Marital status  Housing prices Significant factors Insignificant factors Millennial dataset
  21. 21. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 21 How do the significant factors impact Millennial home purchase likelihood? Increase likelihood of home purchase: Millennials 10% increase in income = 35% more likely to purchase 10% increase in student debt = 4% less likely to purchase 10% increase in home price = 2% less likely to purchase Married = 2.67 times more likely to purchase Decrease likelihood of home purchase:
  22. 22. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Closing
  23. 23. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 23 Conclusion There are a lot of sourcing opportunities for Millennials! Lack of affordable housing High cost areas Credit constraint borrowers Top areas of focus for Mortgage Ready borrowers Greater New York Greater Houston Greater Miami Greater Chicago Greater San Antonio Greater Dallas Greater San Bernardino Greater San Francisco Greater San Antonio Greater San Bernardino Homeownership challenge areas
  24. 24. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. 24 Consumer resources Where to get help Freddie Mac Borrower Help Centers  FMAC information on borrower help centers  Future expansion plans based on this data?  www.freddiemac.com/singlefamily/ho usingpros/help_centers.html Experian Credit EducatorSM  30-minute phone-based education session conducted by a trained Experian Credit Educator agent  Review of individual credit score and credit report basics  www.experian.com/credit- education/services.html
  25. 25. 25©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Renae.Sherman@experian.com Cynthia_Waldron@freddiemac.com For additional information, please contact:

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