Millennials have grown up in front of our very eyes. Perhaps surprisingly, the generation born in the 1980s and 1990s has been the most active segment of home buyers compared to other generations for five straight years, according to a study from the National Association of Realtors.
But some real estate agents may see working with Millennials as more challenging then other groups. After all, they are the youngest buyers on the market. They lack experience in buying or selling real estate and often have a lower price point than generations that have accrued more wealth.
But realtors looking to build long-term relationships with clients should jump at the opportunity to work with Millennials. The majority are first-time home buyers, so they not only need a trusted adviser to show them the ropes now but will need someone for that second or third purchase.
Here are four things about Millennials to know when considering them as potential clients looking to buy or sell real estate.
1. The facts about Millennials and their relationships to homes
The oldest Millennials, born in 1981, are under 40. The youngest Millennials, born in the early 2000s, are still wrapping up high school. This is a large pool of current and future homebuyers. By 2019, Pew Research Center estimates that Millennials (of which there are 73 million in the United States) will outnumber Baby Boomers. This is a huge group of prospective buyers and sellers that real estate professionals can better understand.
HouseHunt Network reports the following regarding real estate trends for Millennials:
• They make up more than 30 percent of all home buyers
• More than 95 percent financed their homes
• One out of every four are already repeat home buyers
• 80 percent purchased because they wanted to make a good investment
• Most – 90 percent – purchased in a major city
• A little over one in 20 Millennials purchase multi-generational homes
These statistics help show how many Millennials are in the market and what they're looking for, offering a glimpse into their motivations for buying a home.
2. Be prepared for their DIY attitude
Most Millennials grew up with the Internet. Even the oldest Millennials were still in school when they Internet came of age. It has always been an integral part of their adult life. They have a DIY mentality and do research online before even picking up the phone to reach out to a real estate agent. Because of this, many Millennials might not understand the value an agent adds to a transaction. Keeping that in mind, it's especially important to help Millennial clients understand your knowledge and firsthand experience as an agent is essential when it comes to navigating the home purchase process. Having a real person in the trenches as their advocate is essential. Building a relationship is perhaps even more important for this generation.
3. They have obstacles that may make them apprehensive to buy
One of the best ways to connect with Millennial home buyers is to understand what obstacles lie between them and the home of their dreams. And the biggest issue for most? Money. Surprise, right?!
Considering a decent portion of Millennials entered the job market during the Great Recession, many have faced low wage growth and rising rents. Add mounting student loan debt—close to $40,000 for the Class of 2016—and it's understandable why the customary 20 percent down payment is a major barrier to home ownership.
According to Yahoo Finance, a typical Millennial needs 12 and a half years to save up for a down payment. What's more, tough lending regulations can make it difficult for Millennials to qualify for a mortgage.
4. Know those obstacles and help Millennials overcome them
But there are programs to help Millennials. FHA loans only require 3.5 percent as a down payment and tend to be a little more lenient on credit score.
Fannie Mae and Freddie Mac mortgages typically only require 5 percent down and they have dropped the down payment minimum in certain situations. For example, Fannie Mae’s HomeReady requires just 3 percent down. And another program Fannie Mae piloted alongside lender Lennar allows $13,000, or 3 percent of a new home’s purchase price to go toward helping the buyer pay down student loan debt.
Meanwhile, the U.S. government cut the premium for mortgage insurance that FHA loan borrowers must pay from 1.35 percent to 0.85 percent, saving borrowers about $1,000 a year. There are also regional programs, such as Colorado's CHFA grant program, that allow prospective buyers to purchase a home for as little as $1,000 down.
Knowing about these types of programs will help you become an expert in the space and assist Millennials that have the credit and desire to purchase, but lack the large down payment traditionally needed.
It's important to connect with Millennial home buyers—they're the largest generation in the nation. They're also the largest demographic group to ever enter the housing market, making up 17 percent of U.S. households, according to MarketWatch. The more you know, the more likely you are to prove yourself to be the best real estate agent for them, which helps your business grow too.
About the author:
Kathleen Kuhn is President and CEO of HouseMaster, the original home inspection franchise. She oversees an organization with more than 315 franchise locations across the U.S. and Canada. HouseMaster has an average net promoter score (NPS) of 92, a near-perfect customer service mark that puts it ahead of the NPS of some of the most customer-centric organizations like Ritz-Carlton and Apple.