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How mortgage lenders use birth rates to predict home sales

A Boulder loan originator discusses how her team looks at historical birth rate data to determine future home sale rates.
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Many professionals in Colorado’s mortgage loan and real estate industries look to birth rate data to predict the number of home sales in the near future, said Alicia Alpenfels, a senior mortgage loan originator with Planet Home Lending in Boulder.

U.S. Census Bureau data from the past several decades shows women, on average, have a baby in their late 20s to early 30s — a milestone that is a big motivator for purchasing a home, Alpenfels explained.

“If you look at the mortgage crisis 2006 to 2010, look at the birth rates at that time — if you go back 33 years, we’re at 1972, 1973, right when Roe v. Wade passed; Not that I need to be political, it’s just simply data points,” she said. “If you look back at those birth rates, all of a sudden, those numbers plummet. They had a decrease in births during that time period for two or three years.”

Those numbers also dipped because there was a lull — Generation X — in between baby boomers having children, and those children — millennials — growing up and having their own babies. Between 2006 and 2010, housing supply continued to grow, despite the lower Generation X population due to fewer women having babies in the early 1970s, the Census Bureau data shows.

“The housing market was just building and building and building, while births were decreasing, which was part of the reason for the mortgage crisis,” Alpenfels said.

Those who are concerned about another mortgage crisis looming need to look at birth rates, she explained.

“If somebody argues ‘we’re back in another mortgage crisis and housing prices are going to drop,’ that’s not the case, because our housing supply is low and our birth rates are high – versus 2006 when our housing supply was high and our birth rates were low,” Alpenfels said. “We’re more stable now.”

Colorado mortgage lenders and real estate professionals are hoping for further stability as inflation rates decline. The U.S. consumer price index for October reported numbers that were lower than expected, so many in the local mortgage rate market are hoping those numbers are the beginning of a downward trend — so mortgage rates come back down.

Millennials — those who were born between 1981 and 1997 — were born at higher rates than Generation X, who were born between 1965 and 1980, according to the U.S. Census Bureau. That higher population of millennials is out seeking homes, despite skyrocketing Colorado real estate prices. And if inflation rates decline, mortgages will be more affordable.

“We hope inflation will keep decreasing,” Alpenfels said.