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   ARTICLE   |   From Scotsman Guide Residential Edition   |   January 2016

Millennials Need a Human Touch in Homebuying

This tech-savvy generation values smartphones, independence and guidance from trusted experts


The millennial generation, typically defined as those born between the early 1980s and 2000, in sheer numbers is staggering, encompassing an estimated 83.1 million Americans — more than a quarter of the nation’s population. To be successful as a mortgage originator going forward, you have to find a way to tap into the potential of this still-emerging and powerful consumer force.

As part of that, it’s important to understand the common threads among millennials that, at least in theory, tend to promote or detract from homeownership. For starters, research shows that millennials have a strong sense of loyalty toward the local community. They value their families (especially their parents) and are the most-educated generation in history.

Although these are all positive attributes, it’s important to note that millennials as a group also have unprecedented student-loan debt — estimated at an average of $28,400 per college graduate. It’s understandably difficult to save for a downpayment with so much debt. The decision to purchase a home also is often tied to job prospects. The flexibility that comes with renting — a path chosen by many millennials to date — can be an advantage in the recovering labor market that is still in play.

Millennials also are aware of today’s tight lending environment. A survey by the Federal Reserve Bank of New York suggests that some 22 percent of borrowers with credit scores below 680 may decide not to apply for a mortgage because they feel discouraged by a prior application rejection, their dour employment prospects or the burden of paying down existing debt — such as student loans. Many millennials also are delaying marriage and having children, two major drivers of homeownership.

For all of these reasons, there is cause for concern for mortgage originators seeking to serve this population. Despite the challenges, however, millennials are the key to ensuring a robust housing market in the years ahead. So giving up is not a sound option.

Homeward bound

Now, here’s the good news. According to research by Trulia, 93 percent of renters ages 18 to 34 do expect to buy a home someday. Even more telling are the findings of the 2015 TD Bank Mortgage Service Index, in which 50 percent of millennials surveyed say they are either “extremely” or “very likely” to buy a house within the next year. This overwhelming percentage suggests many millennials have a strong desire to become homeowners, and it is up to mortgage originators and other real estate professionals to help make that quest a reality.

Typically, the homeownership cycle begins with the first-time homebuyer purchasing the home of a move-up buyer. This cycle of real estate starts with the millennials, who currently have the largest share of first-time homebuyers (68 percent) among all generational groups. Saving for a downpayment is a challenge for homebuyers in any generation; however, it’s a significant issue for millennials, a generation saddled with substantial debt.

The objective, then, is to match this massive wave of potential millennial homebuyers with the right mortgage products. Government- backed mortgages, such as Federal Housing Administration (FHA) loans and, to a lesser extent, U.S. Department of Agriculture and U.S. Department of Veterans Affairs loans, seem to fit the bill. These loan products are gaining momentum in today’s market because of the lower-downpayment requirements for first-time homebuyers.

Technology makes life better, more informed and connected,

but absolutely nothing replaces the importance of face-to-face,

personal interactions in the mortgage and real estate business.

Another product, the FHA 203(k) renovation loan, has great potential because it offers the combination of a low-downpayment purchase loan coupled with home-improvement financing — an attractive package for millennial homebuyers, who tend to value making investments in their local communities.

Opening the door

To best serve prospective millennial homebuyers as a mortgage professional, it’s important to study their habits and preferences. On the communications front, many millennials would much rather text or e-mail you than talk with you on the phone. They thrive on their smartphones, always researching and communicating with their fast fingers. Many millennials, research demonstrates, want fast answers to questions. They expect and want you to engage in social media with them because they crave making connections. Nearly half of millennials report having more than 200 Facebook friends.

Millennials want to do business with professionals in their community because connecting with the local community is important to them, studies show. As information junkies, it’s a good bet that millennial buyers have already researched local housing professionals and reviewed their testimonials. It’s also likely many know exactly where they want to live and have already found a few houses that interest them. They are counting on mortgage and real estate professionals to help them get the right mortgage and best house, not necessarily to learn about the overall process, which is easily researched online.

Studies show millennials do want information from trusted, honest sources, but they do not want a sales pitch. As an originator or other housing-industry professional, you need to demonstrate to them that you are an expert who knows things that websites, advertisements and the media don’t know or can’t provide them.

Millennials value face-to-face contact because they want a personal resource. Although they have done extensive research (millennials are the generation of Google and on-demand technology), they also appreciate the help of professionals. They are savvy enough to understand that they are not the experts, even though they have done their homework. About 50 percent of millennials found the home they purchased via the Internet, but 90 percent used a real estate agent to actually make the purchase, National Association of Realtors data shows.

Millennials need help coping with the burdensome and opaque paperwork that comes with purchasing a home. They want experts available to help them understand and interpret the information, including assessing their finances. Millennials, research shows, often prefer and are most comfortable working in teams (such as with a loan officer and real estate agent) as opposed to doing it alone. Buying a home could be the biggest financial transaction of their lives, and it’s a good bet they don’t want to take it on solo, without professional guidance.

•  •  •

Technology makes life better, more informed and connected, but absolutely nothing replaces the importance of face-to-face, personal interactions in the mortgage and real estate business. Even the most technologically reliant generation in this nation’s history still strongly desires one-on-one contact and personal relationships. Understanding the mindset and preferences of the largest generation will help mortgage professionals make the connections that will spur continued growth in the real estate market — and the economy overall. 


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