Millennials are making their mark in the home buying industry.
According to the National Association of Realtors, Millennials held the highest share of home buying activity out of all other generations for the fifth consecutive year. Just over one-third of all home purchases were made by Millennials, who held a market share of 36% over the past year, up from 34% in 2017.
The survey also identified millennials as the generation most likely to use a real-estate agent. The reason? They need your help in understanding the buying process!
So, what does that mean for realtors? Millennials are looking to you for answers and we’re here to help you with the top 3 tips a mortgage lender would tell your clients to be more competitive first-time homebuyers.
- Don’t look for a home on Sunday and your loan on Monday
It’s fun to map out a weekend full of open houses, but there is no sense in getting emotionally involved in homes that homebuyers are ultimately unable to afford. To avoid the Monday blues, it’s critical to go through the prequalification process BEFORE they even click on that link to view photos of the house.
Many millennials may be afraid to hear that they don’t qualify for a mortgage or the loan is too small for the house of their dreams but having a pre-approval letter in hand only helps them to be more competitive in a market with low inventory.
- You don’t need the traditional 20% down payment
With the prices of homes skyrocketing, it’s not always possible to put down 20% on a home. That is especially true for first-time home buyers. In fact, according to the NAR’s 2017 Profile of Home Buyers and Sellers, the median down payment fell to 5% for first-time buyers.
However, there are even some cases where first-time homebuyers can access down payment assistance and put down even less. First-time home buyers should be aware that creative programs exist, so it’s worth investigating alternative options before sitting out of the game until hitting that magic number of 20%.
- Putting perspective back into interest rates
This can be the hardest topic to convey to millennials, as most have grown accustomed to rates at or under 4%. Telling them back in your day, rates were 18% (and a movie ticket cost $3.00), won’t bring them any reassurance, or perspective. It’s important to help them to understand that interest rates are not guaranteed and buying a home before the rates rise, simply saves money in the end.
As an example, Freddie Mac’s Economic and Housing Research Group forecasts the 30-year fixed-rate mortgage averaging 4.6% this year, rising to 5.1% in 2019. That may seem like a small jump but looking back to 2016, anyone would have found over 4% to be outrageous. Small increases over time translate into more money coming out of their wallets. Showing them exact calculations can help demonstrate that.
Bottom line, this group of buyers isn’t going to want to live with Mom and Dad forever. This market is sure to grow steadily in the future.