Millenials have come of age. The generation born between 1981 and 1996 is bigger than the baby boomer generation, and millions of them are on the hunt for the home of their dreams. This year, 4.8 million American millennials will turn 30, while many millions more will reach milestones that will spur them on toward home ownership.
It’s no secret that millennials have faced a tougher journey to get on the housing ladder than previous generations. Many of the approximately 73 million millennials in the U.S. saw a tough start to their careers amid the financial crisis, with stagnating salaries and a rising cost of living slowing down their journey to home ownership. As a result, roughly 1 millenial in 3 took on a second job to save up for their down payments.
As a loan officer, you want to get to grips with the millennial housing market, as well get to know this generation with the purchasing power. What are these millennials looking for when buying a home?
1. Millenials Will Buy More Houses This Year Than Any Other Age Group
According to Realtor.com’s 2020 housing forecast, millenials will buy more homes this year than any other age bracket, scooping up more than 50% of the market. Meanwhile, Generation X (those born between the ages of 1965–80) will buy a more-modest 32% of the market, and baby boomers (1946–64) will only account for 17% of purchases.
2. Millennials Favor Home-Finding Apps
The flood of millennials seeking homes has brought about some big changes in the way Realtors do business. It should come as no surprise that the generation using dating apps like Tinder to find their partners are also using apps to find their homes. Last year, the National Association of Realtors reported that 81% of older millennials found their homes through an app.
3. Millennials Expect Rewards
Perhaps due to the lengthy struggle it took them to get into the housing market, millennials have come to expect extras to help them settle in once they buy. Loan officers can up their interactions with these potential homeowners by telling them about companies such as Amazon-affiliated TurnKey Home Purchase Service reward new homeowners with free smart-home products up to a value of $5,000, as well as offering services such as cleaning or TV installation and programming.
4. Millennials Are Entering a Tough Market
Despite the fact that millennials may have finally saved up their down payments and been pre-approved for mortgages, they may find it harder than they’d hoped to land their dream homes. It’s estimated that there are around 4 million fewer homes than there are prospective buyers right now, which will lead to a 1.8% decrease in house sales this year.
5. Millennials Are Moving Out
While millennials may have spent the last few years in the bustle of a city, many will be moving out to the suburbs when it comes to putting down roots. However, the assembly-line homes of suburbia may well be a thing of the past. Loan officers can help them adjust by focusing their attention on the emergence of vibrant “suburban downtown” areas built with millennials in mind.
6. Millennials Are More Likely to Suffer From Buyer’s Remorse
Millennials are far more likely to suffer buyer’s remorse than any other age group. According to a study from the Urban Institute’s Housing Finance Policy Center, 63% of millennials feel regrets about their home purchases, with just 50% of Gen X and 35% of baby boomers having such regrets. For 18% of millennial homeowners, it’s the size of their homes that causes them upset, while 10% aren’t happy with the area they live in.
7. Millennials Are Using Their Retirement Funds to Buy Homes
It’s a worrying trend: 1 millennium homeowner in 3 withdrew from their retirement funds to purchase their homes, and 1 prospective millennial homeowner in 5 plans on doing the same. First-time homeowners aged under 59 ½ are entitled to take up to $10,000 out of a 401(k) or an IRA, but this could be storing up trouble further down the line.
With these insights in hand, loan officers should be able to build their clientele of millennial home buyers. To help your millennial clients find the home of their dreams — with the lowest down payment and monthly installments — consider providing them with a set of tools they can use to achieve their best possible credit score before applying for a mortgage. A tool like ScoreMaster can help provide them with actionable steps on how to get their best credit score — a win for them and you. Learn more about ScoreMaster today.