Members of the Millennial generations (born between 1980 and 1998) are on the move, with a growing number moving into homeownership. During 2016, they accounted for 34% of homebuyers according to The National Association of REALTORS (NAR) Home Buyer and Seller Generational Trends Report 2017.
Where They Are Headed
After flocking to urban areas as single renters, many Millennial buyers indicate they are headed to the subeurbs and beyond. As they marry and start families, more Millennials seem to be seeking the same things previous generations did: more room, open spaces, and safe neighborhoods with access to transportation. Affordability is also a consideration. Millennials understandably want to get the most home they can for their money.
Concerns for affordability are apparent in these buyer's general preference for single-family homes that will need minimal repair and maintenance. The NAR report also indicates Millennial homebuyers pay close attention to the condition of homes. They are sensitive to the age of heating and cooling units, the roof, appliances, and kitchen and bath fixtures when placing their offers. Minimizing the expenses faced after closing appears to be a priority for many.
The Down Payment Is a Challenge
Saving for a down payment remains a key obstacle to homeownership, according to the NAR Report. For many, it isn't that they are spending unwisely. Instead, they have been using a considerable amount of their budget to repay student loans. In fact, NAR found 46 percent of Millennial homebuyers last year had student loan balances with a median balance of $25,000.
An Opportunity for Loan Officers
There seems to be a fair amount of educating that you can offer these clients, many of whom are first time homebuyers. Ninety-eight percent of the Millennials who bought homes in 2016 financed their purchases, according to the NAR Report. Fifty-six percent of them used conventional financing, 27 percent FHA, and 9 percent accessed a VA mortgage. The amount of the home that was financed was 93 percent.
Typical home purchased by Millennial buyers in 2016
- Built in 1984
- 1,800 square feet
- 3 bedrooms/2 baths
While these borrowers made the purchases work, they certainly can benefit from sitting down with a professional to make sure that they are making the best decisions in view of their current needs and long-term financial goals. Many may also benefit from understanding all their financing options - those beyond the conventional - along with any local or state incentives for which they qualify.
These buyers may also be unaware of the opportunities to combine a first mortgage with a home equity product or of the availability of products like the FHA 203(k) loan, which can help offset the cost of renovations. This type of financing could expand the pool of homes they are willing to consider and enable them to build home equity more efficiently.
The Millennial home wave is just getting underway. While most buyers are still using traditional channels to reach Loan Officers, NAR reports that last year 26 percent of these homebuyers searched for mortgage information online. In fact, 23 percent were prequalified online, 12 percent found their Loan Officer online, and 16 percent applied for their mortgages online. To connect with these buyers, you may want to consider incorporating a multichannel approach.
However you choose to reach them, members of the Internet generation are on the move, and they are as ready to finance as you are to lend.