There have been so many reports in recent months about both the importance of millennials in contributing to the housing recovery and the uphill battle they face when trying to buy a home that this has become a main topic of conversation whenever I talk with agents and brokers in the MLS I manage.
I've picked up some tips from all these conversations so I want to share a few of them here. The millennial generation is an even larger population than the baby boomers and their potential impact is huge. We in the industry can tweak some of our methods to help them overcome the barriers to finding the right home.
First we need to address the question of money. There’s no getting around the fact that many millennials have the double burden of a small amount of savings combined with sizable amount of student loan payments. As much of an obstacle as this is, the situation is only going to get more difficult for them as interest rates increase and home prices rise.
A study of 35 metro areas around the country suggests that for every one percent increase in a mortgage interest rate, affordability decreases by 10 percent. A common misconception amongst first-time buyers is that they will have more saved up for a downpayment in a year or two and they will be in a better position to buy when that times comes, but they haven’t accounted for how much more they will need just to buy the same house when the next year rolls around.
This is a point of entry for real estate agents, however, since a few graphs demonstrating the savings between an interest rate under 4 percent versus one closer to 6 percent is enough of a teachable moment that first-time homebuyers will pay attention.
Once millennials realize they should try to buy sooner rather than later, the daunting task of trying to find a home they like is the next obstacle. From all the conversations I've had with younger buyers I've taken to summarizing their desires as wishing they could live in College 2.0. They want all the socializing opportunities and convenient amenities of communal housing, but with more privacy, their own kitchen, outdoor entertaining spaces, and the option to own a dog. This means we as an industry need to shed more light on the features of a home that might seem too ordinary to mention, but are seen as a great perk for the younger buyers.
For example, lately I’ve heard agents tell me they have started including more information about neighborhood options that would equate to places on a college campus where you can casually run into people who live in the neighborhood. Agents say they will still always point out the hot restaurant or nearby public transportation, but it can be just as important to mention the no-name coffee shops where serendipitous socializing takes place. Remember this is a demographic that did everything from science fair projects to their senior prom in groups, so a lifestyle built around socializing is one of their biggest priorities.
Getting the word out about a listing that would meet the needs of a first-time buyer can be an agent’s biggest challenge. Millennials are so wedded to receiving their news and information via their social feeds that traditional advertising rarely enters onto their radar. But I’m hearing from agents that the power of word of mouth hasn't died out yet, it just might take a few extra steps to convert it into a true lead.
They are finding success in hosting open houses that feel like a social event—with the most popular version being Yappy Hours that let prospective buyers bring their dogs to an event in the lobby or outdoor dog yard (something that often gets shared on social networks). Also, this is an age group that is very accustomed to content-based marketing and agents are finding that newsletters with personality as well as informative statistics catch their attention more than just a list of properties (it is also something they are more likely to forward to friends).
The obstacles for first-time homebuyers exist, but they aren't insurmountable. Nor do we have to completely overhaul the way we do our jobs to bring them onto the first rung of the property ladder. Shifting our focus just slightly could bring about tremendous results and in turn lay the groundwork for overall stability in the housing market.
For more information, visit http://www.mris.com.
By Andrew Strauch
Andrew Strauch, Vice-President of Product Innovation and Marketing with MRIS, has more than 20 years experience in product management, product marketing and engineering.