We cannot ignore the transformation that is occurring in the residential housing market today. Relatively unchanged since the 1950s, the housing market will soon (and in some markets is already) be catering to a new breed of American homeowners, Millennials. Young professionals, who have never lived in a world without a global, online information network, are the future of the mortgage industry. They have widely different concerns from their predecessors. The mortgage industry needs to be prepared to address all of these concerns at every level of the mortgage process.
Unlike previous generations, Millennials have not jumped quickly into homeownership. They have, as a group, put it off, choosing to live more simply and spend their money instead on life experiences, travel, fashion, entertainment and technology. According to the Mortgage Bankers Association, the result has been a substantial decrease in the number of first time homebuyers active in the market. MBA puts that number at 10% below average numbers.
There are a number of reasons that Millennials are putting off the home buying transaction. First, and perhaps most important for our industry, is that they have a deep mistrust of the financial services industry. Many of these young people were still living at home when their parents were visited by the historic downturn. They watched their parents’ retirement accounts wither away and many of them lost their family homes. It will take a concerted effort to win back their trust.
Beyond that, these young people have grown up with different priorities from their parents. They don’t want to be burdened with a mortgage loan, especially when so many of them are still struggling to deal with their monthly student loan debt payments.
While many experts are looking at these facts and forecasting a desolate time for lenders with negative long-term effects on the industry, not everyone’s outlook is so bleak. The oldest members of the millennial generation are ready to enter the market. When they do, we need to be ready.
Lenders need to understand this generations’ baggage of trust and debt issues and make changes to their systems to move millennials through the mortgage process more easily. This includes investing in technology that will appeal to this new generation and offering them a variety of programs to help encourage their financial stability. The time to prepare is now.