As we continue this 4-part series, we look into the millennials’ economic situation, and how the events of the Great Recession have shaped their mentality and buying habits. We share how we as mortgage professionals can formulate new strategies to adapt to this generation’s needs and ultimately, bring our business into the new era.
Part 3-Economics: From Recess to Recession
As millennials burst forth from college, ready to experience the world, they don’t face multitude of opportunities, but rather the consequences of one of the most devastating economic crises of all time. Millennials find themselves drowning in student debt while facing a bleak job market. They are overqualified and underemployed, and are struggling to succeed in this new, difficult landscape. As a result, millennials are not buying homes in great numbers. The common perception is that millennials do not want to buy a home because they are stuck in a kind of perpetual childhood, and will hold on until the bitter end. But this perception is pure myth; millennials do want to buy homes, but won’t or feel like they can’t for understandable reasons.
What we Know: Millennials aren’t buying homes for a multitude of reasons.
The commonly held view in real estate is that it’s better to buy a home than rent one – homeowners get to feel a sense of pride, build equity, and receive tax deductions. Despite this, millennials continue to rent in large numbers. In March 2016, a report by The National Association of Realtors entitled Home Buyer and Seller Generational Trends, showed that first-time homeownership dropped from a historical average of 40% to 32%, the lowest percentage since 1987. One reason for this is that millennials seek the urban life style – transient and free. Millennials are getting married at a later age, causing a delay in homeownership. Additionally, some millennials prefer the ease of having amenities, and a landlord to take care of housing issues.
By far the biggest deterrent to millennials buying homes is their perception of financial instability. It’s not that most millennials don’t want to buy a home, it’s that they feel that they can’t. Affording a down payment and fears of a bad credit history lie at the forefront of this skepticism. And while this is occurring, rents continue to rise higher and higher.
What you can do: Don’t blame millennials. Educate them.
It is important to alleviate millennial clients’ fears by laying out the options they have. Many loans are available with down payments between 0-6%, a popular option for first time home buyers and those with lower credit ratings. About 30% of all homebuyers are putting down less than 3% for a down payment. Explain the alternative ways your client can obtain financing to aid in their home purchase, which will alleviate their fears of monetary inadequacy.
Many millennials have no idea that they are actually paying more to rent an apartment than to buy a house. Calculate their future mortgage payments and compare them to their annual rent. Depending on the home and neighborhood they are looking at, there’s a good chance that it is wiser to buy than rent.
What we Know:After the crisis, millennials have little trust in the housing industry.
Millennials grew up and started their adult lives in the midst of a horrific financial crash. Banks and lenders were seen as dependable foundations of financial security. When the markets crashed, millennials felt betrayed and distrustful toward these companies. The media portrayed banking and housing institutions as corrupt entities responsible for the recession, never held accountable because of government bailouts. For these reasons, millennials are still skeptical about the home buying process and those involved with it.
What you can do: Rebuild trust with your clients.
Accept that your client may have a certain degree of distrust toward financial institutions of any kind. It’s important to be cognizant of this attitude, and to empathize with your clients. Instead of seeing yourself as merely a provider of financial products, try seeing yourself as a problem solver and a guide. Lead your clients toward making sound financial decisions and explain why it’s acceptable to be nervous taking these steps, but that you are here to help. Try to make the home-buying process as simple and accessible as possible for a millennial. It will make all the difference. Make sure to elicit feedback from former satisfied customers. As previously mentioned in Part 2 of this series, millennials trust peer reviews more than other generations, so having positive results on all crowd-sourced review websites will show that others have successfully worked with you, and help build trust with your clients.
It may be difficult to adjust to this new generation, but if you can gain the trust and the respect of a millennial, you will have an ideal client.
In the final installment of this series, we will focus on the mentality and viewpoints of millennials, and how this affects them as clients. Millennials are socially conscious consumers who demand justice, honesty and transparency in every facet of their lives, especially in their buying habits. By understanding the millennial mindset, you’ll learn to relate to these clients; and in doing so, gain a clear advantage over the competition.
About Jungo Jungo offers pre-built Salesforce apps and accelerated implementation services for financial service verticals – including the mortgage, real estate, and wealth management industries. Jungo works with the World’s #1 Customer Success Platform and Partner Ecosystem to optimize its array of cloud based tools. With more than a decade of experience creating and integrating solutions for the financial services industries, Jungo is the preeminent expert in the field. Jungo’s innovative approach to Salesforce implementation helps businesses connect with customers and drive sales.Click here to schedule a live demonstration of The Mortgage App for Salesforce. Click here to schedule a live demo of The Marketing Platform.