In the past ten years, the country has made great strides towards economic recovery, and many millennials who entered the job and housing markets during the downturn have had a chance to pay down their student loan debt and advance in their careers, which means that they finally feel confident about owning a home. In fact, homeownership rates among people in their late 20’s and early 30’s are two to four times higher than any other age group.1
As this younger generation has started entering the housing market in force, they’ve done so in true millennial fashion, bringing technology and suburban sensibility with them. In this article, we’ll discuss how this age group is impacting the market.
Many millennials who would have otherwise purchased a starter home in the mid-2000’s were deterred by the housing crisis and crippling student loan debt. Now that they can afford it, many first time millennial homeowners are opting to purchase nicer homes in suburban areas.
The cost to live in urban centers has soared, thanks to revitalization projects in many major cities. As a result, many millennials are opting to buy homes in the suburbs. In fact, almost half of millennial homeowners (47%) prefer living in the suburbs to the big city.1
According to Zillow, “Their willingness to live in the suburbs, along with the fact that millennials waited longer to buy their first homes, may be part of the reason that today’s “starter” homes are almost as large as “move-up” homes and cost just 18 percent less.”2
No article about millennials would be complete without mentioning technology. This is the generation that grew up with the internet, so it’s no surprise that they’re using it during the process of searching for and purchasing a home. Recent data shows that 99% of millennials search online to get information about homes and homebuying, and 81% of older millennials found their home using a mobile app.1,3
This has fundamentally changed the role that real estate agents play in house hunting. In times past, real estate agents were a valuable source of information about what was available on the market. Today, most millennials are finding that there are apps for that, so the value of a real estate agent has shifted to negotiating on their behalf, walking them through the homebuying process, broker relationships, and market expertise.
As a result, real estate agents are having to adapt to using new forms of communication, with 90% of agents communicating via text and 94% using email. Another 36% chat with clients through instant messaging.1
Transparent Information & Close Communication
Having lived through the housing crisis, millennials are understandably wary about the home buying and financing process, and they place a high value on having access to trustworthy advice and transparent information. Since many millennials are first-time homebuyers, they may not be entirely familiar with all the ins and outs of the process. Successful lending professionals are answering this concern by focusing on creating clear expectations with their clients about what buying a home is going to look like.
The home appraisal process, for example, is one of the details of financing a home that millennials are learning to negotiate, and a good lender will walk them through it with lots of transparent communication. A real estate appraisal is an assessment of a property’s value as determined by the house’s physical characteristics, features, condition, and in comparison to homes for sale in the surrounding area. The main objective for an appraiser is to help assure lenders that the loan amount does not exceed the value of the property.
Since this is an area of financing that can be potentially wrought with frustration and hassle, lenders who want to work with millennials should focus on scheduling an appraisal quickly, remaining in close communication with the buyer throughout the process, and completing the appraisal report in a timely manner.
One thing that millennials (or anyone for that matter) certainly don’t appreciate is delays and mistakes, which is why it’s important to have an airtight valuation system in place at your lending institution—both to keep consumers happy, and to mitigate your own risk.
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