HUD Secretary Julián Castro, whose name has been bantered for months as a possible vice presidential candidate, joined Realtor.com Chief Economist Jonathan Smoke in a conversation Monday evening about millennial housing held at George Washington University in Washington, D.C.
In the conversation, Secretary Castro and Smoke addressed a number of questions surrounding America's most talked about generation and how they are faring the housing market amid numerous regulatory changes.
To begin the live stream, Smoke addressed who the millennial generation is and why they are important, stating that they outnumber the Baby Boomer generation by 8 million. He also added that they are the "present and future" of the housing market.
According to Smoke, 32 percent of millennials were homebuyers this year, while 18 percent were sellers. On the one other hand, 40 percent of millennials own a home, while 60 percent rent.
Secretary Castro then addressed some the recent changes that the Federal Housing Administration (FHA) has made to "open their credit box" to responsible borrowers, along with adjusting affordability.
He expressed the importance of maintaining "safeguards in place, but opening up credit box so more millennials, who represent 68 percent of first-time homebuyers, have access to own a home."
In January 2015, the President announced a reduction to the mortgage insurance premiums through the FHA, saving borrowers 900 per year.In addition, in May 2014, the FHA launched their "Blueprint for Access" meant to ease the risk of lenders while expanding credit.
"We just came out of a crisis," Secretary Castro said. "We must learn the lessons of the past so we don't slide back to where we were before. At the same time, we must offer great opportunity for responsible folks to be able to own a home."
There are three data points that speak to opening the credit box, according to Smoke:
- FICO Credit Score
- Down Payment
These factors affect Millennial homeownership, but Smoke believes that valiant efforts are being made by the FHA to bring more options to this generation and expand credit access.
He also noted that despite popular belief, Millennials "have a positive view of the economy and their own [financial] conditions getting better. They believe in homeownership and their interest is astounding."
Realtor.com survey data showed the number one reason that Millennials got into the housing market this year was an increase in income.
"[Millennials] have to be able to save for a down payment, they have to be able to deal with student debt, and they have to be able to deal with the alternative-renting, which looks all the more unattractive these days," Smoke noted.
Smoke also pointed out that one of the fundamental issues for younger households involves the outdated credit score system and standards.
"We are still using credit score processes and standards that were created when Millennials were not alive and FICO standards need to catch up to the 21st century."