Written by Jaymi Naciri
Homebuyers born between 1981 and 1997 have been as elusive as the Loch Ness monster, and at least as critically studied by a real estate market that needs an influx of young money.
“Instead of representing the 38% to 40% of purchases that real estate industry economists say would have been expected for first-timers, they’ve lagged behind in market share, sometimes by as much as 10 percentage points,” said the L.A. Times.
But is the tide turning? Recent trends may portend an end to the millennial freeze-out.
A Millennial Surge
“Expect the open-house crowds to skew a little younger during this year’s spring homebuying season,” said Bloomberg Business. “Millennials made up 32 percent of the U.S. housing market in 2014, up from 28 percent two years earlier, and have pulled ahead of the older Generation X as the largest segment of buyers.”
The L.A. Times agrees. “Call them the prodigal millennials: Statistical measures and anecdotal reports suggest that young couples and singles in their late 20s and early 30s have begun making a belated entry into the homebuying market, pushed by mortgage rates in the mid-3% range, government efforts to ease credit requirements and deep frustrations at having to pay rising rents without creating equity.”
In fact, rising rents have become so problematic in many areas that younger buyers who previously may not have considered buying now see the benefits.
“Young people are getting squeezed because the gap between rents and incomes is widening to an unsustainable level in many areas of the country,” said Bloomberg Business. “In the past five years, the typical rent jumped 15 percent, while the income of renters increased by just 11 percent.”
On the other end, a stabilized housing market, near-historic-low interest rates, and new incentives are driving millennials toward buying.
“Regulators pushed hard last year to pass measures that make it easier to obtain a mortgage, especially for young first-time buyers,” said CNBC.
Added the L.A. Times: “Key sources of financing for entry-level buyers—the Federal Housing Administration and giant investors Fannie Mae and Freddie Mac—have announced consumer-friendly improvements to their rules. “The FHA cut its punitively high upfront mortgage insurance premiums and Fannie and Freddie reduced minimum down payments to 3% from 5%.”
The importance of millennial dollars – and how to get them
It’s estimated that there are 75 million millennials out there, and the Pew Research Center expects this group to outnumber baby boomers this year. Their participation in the “great American dream” is critical—but so too is an understanding of how to work with them.
The “old” way of doing business is just that – old. It’s incumbent on realtors to work with younger buyers in a new way, said U.S. News Money.
“As the millennial generation, also known as Generation Y, takes a greater role in the housing market, young people’s preferences are starting to shape the way real estate business is done,” they said.
On the millennial manifesto:
Text instead of call. The need for good-old-fashioned customer service is still needed—maybe more than ever—only the delivery has changed.
Be prepared for how prepared they are. “More than 50 percent of millennials search for homes on their phones, and, among those, 26 percent end up buying a home they found that way. With millennials, we do not control information. What they need is for us to interpret the information.”
Information overload in an instant. Millennials have grown up in an environment in which they don’t have to wait for anything and they can click a button to get an immediate answer to almost any question. Making them wait for information is a death knell to a successful real estate partnership.
Social media stars. Agents today have to have a strong online presence if they are going to connect with millennials.