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Millennials are people born between 1981–1997 and are between 36 and 20 years old. These computer savvy buyers are disrupting many established practices. Nowhere else is this more evident than home buying and obtaining mortgages.
Why are millennials causing change in the home buying process?
Growing up, millennials were the first generation to have computers as a part of their everyday lives and their educational process. They use their smartphones more than they use desktop computers. As reported by Nielsen, “When looking at smartphone...penetration is highest among Millennials aged 18-24, 98% of whom own smartphones. Millennials aged 25-34 are right on their heels, with a 97% ownership rate.” According to survey results from The Bank of America, “Nearly four in 10 millennials (39%) say they interact more with their smartphones than they do with their significant others, parents, friends, children or co-workers.”
Apps are how they bank (Mint), send friends money or share payments (Venmo), keep up with their friends (YikYak, Facebook, find dates (Tinder), keep amused (multiple gaming apps.). ComScore reports, “Social apps like YikYak, Vine, Snapchat and Timehop skew heavily toward Millennials, as do entertainment apps like Playstation, Twitch, Xbox One Smartglass, SoundCloud and YouTube Music.” Socializing is not the only activity that’s impacted by Millennial smartphone use. They use apps for daily life when they want to hail a cab or exercise.
It’s easy to comprehend this generation’s high consumption of digital media drives the way they engage with the world. Digital use spills over into every aspect of life. When Millennials search for a home or apply for a mortgage, they begin online. Homebuilders, mortgage originators and banks are upping their game to meet these buyers where they live digitally.
Millennial homebuyer traits
Millennials begin their home shopping online. When it comes to buying homes, Zillow says in their 2016 Consumer Housing Trends Report, “Millennials...account for 42 percent of today’s home buyers, which is more than any other generation.” They research homes, and avidly seek information about buying. 9 in 10 use the internet for their research and 8 in 10 use smartphone apps. Interviewing agents for suitability is common for these buyers.
Realtors® wishing to work with Millennial buyers must be ready to talk with them on the phone, because as much as Millennials love to text, they prefer to discuss homes over the phone. The same goes for lenders. Buyers want to talk with the lenders from whom they are interested in sourcing a mortgage.
Loyalty is a strong trait among Millennials. Zillow says, “When they enlist an agent they do so earlier in the home-search process, shop for a home faster than most older generations, and are more likely to stay in touch with an agent.”
Because Millennials became adults during the great recession, they are cautious homebuyers. They frequently have higher student loans and are underemployed. Due their debt, they may choose to rent rather than purchase new new home, delaying their new home acquisition until they are older than previous generations’ first home purchase age.
Influencing their home location choices is the preference for city living. Millennials have a love for city living, public transportation and purchase cars at a lower rate than other demographics. Though there is growth in their choice move to the suburbs. Communities, such as Nexton in Berkeley County, which contain a full array of lifestyle options appeal to Millennials. When Millennials do choose to purchase homes in the suburbs, they prefer to live near public transportation, if possible, and select communities with full lifestyle.
Millennial homebuyers’ attitude towards home ownership matches that of Boomers’. As noted by Zillow, “They believe in the power of a home as a financial investment just as much as older generations do, put more weight in online reviews of agents and lenders, and remain incredibly loyal to the professionals and peers that helped them through the process.”
Millennial homebuyers are skipping the traditional “starter home” and choosing to buy homes at the median price. They want homes that are turn-key, have updated kitchens and baths, contain a home office, feature open floor plans, have smart-home technology, are low maintenance, are energy efficient, are in good locations.
Mortgage and Millennials
Due to their financial situations, Millennials may need to work on their FICO score prior to shopping for a mortgage. Mortgage lenders and Realtors who work with Millennials can steer them in the direction of advice to help them make changes before they seek to qualify. In the Charleston area programs like OriginSC, from Family Services, Inc. provide homeowner and buyer education. They also provide credit counseling.
The traditional expectation of a 20% down payment can also be modified by a number of programs designed to assist this buyer. As reported by CNBC, “More than one-third of home loans made to millennials since 2014 were Federal Housing Administration loans insured by the federal government.”
Applications such as DocMagic’s eClosing solution are changing the way closings and document management is handled for this generation. Millennials are using online loan origination tools like RocketMortgage and LendingTree as well.
Millennials expect their mortgage lenders to have a strong brand presence on social media, have the utmost transparency, demonstrate high ethics, have positive reviews from peers, and utilize solid communication skills.
The wrap-up on Millennial homebuyers
On the whole, Millennial buyers are a strong wave moving into the housing market. Builders and lenders who comprehend the needs of this generation can secure a loyal, informed buyer who will refer new buyers and seek more services in the future. Realtors are an important partner for Millennials and Realtors who understand the collaborative nature demanded by Millennials will also gain a lifelong client.
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