It may seem counter-intuitive that the generation most likely to be riddled with student loan debt and living with their parents is also the most likely to be buying a home. As far as the mortgage industry is concerned, though, millennials are the fastest-growing market in the country. Currently comprising 25% of the US population, millennials have finally come to outnumber baby boomers as the largest generation in American history. Besides being a large market, millennials are also lucrative one: even with much of the generation still under 18, consumer spending already reaches $1.3 trillion and is expected to nearly triple by 2018. As the generation continues to age, its nearly 87 million potential homebuyers cannot be ignored: they’re rapidly becoming the housing industry’s most significant market.
Typically encompassing those born between 1984 and 2000, millennials are the best-educated and most ethnically diverse generation in American history. Yet, they’re also a generation rattled by the economic crisis. Many graduated from college in the wake of the 2008 housing market crash, facing high unemployment rates and the weakest job market in history. Even as older millennials begin to recover from economic strain, the younger generation still faces record-high student loan debt, causing 32% of young adults to live with their parents. Rather than deterring millennials from home ownership entirely, this economic turmoil has caused millennials to simply buy their first homes later—and the older end of the generation is entering their prime years for first-time home ownership.
There are several ways for the mortgage industry to tap into this new market. Today’s young adults are the first generation to be “technological natives,” born into an era of advanced technology. A streamlined and concise website is a necessity. 62% of millennials indicate social media engagement makes them more loyal customers, necessitating a Facebook or Twitter page to enhance credibility.
Millennials have done everything from applying for a driver’s license to applying to college digitally and would expect nothing less when applying for a mortgage. Lenders can look to banks as a model of digital success. This traditionally brick-and-mortar enterprise has seen the success of banks without a single physical branch, such as Bank of Internet and Connexus Credit Union. To keep up with the growing contingent of digital-only mortgage lenders, a lender should digitalize as much of its process as possible.
Having grown up with myriad outlets to voice their every opinion, millennials are also a generation obsessed with consumer feedback, providing it as much as reading it. Companies should offer an outlet for millennials to provide feedback, perhaps on a Yelp page or through testimonials on a lender’s website.
Perhaps most significantly, millennials aren’t just interested in the mortgage lender with the lowest interest; rather, they seek companies with a brand that aligns with their values. Between volatile markets and the subprime mortgage crisis, millennials still harbor distrust towards financial institutions, mortgage lenders included. Lenders must work to upturn this perception, painting themselves as altruistic brands working to make dreams of home ownership come true. A company can most authentically build this image through the creation of a mission statement that guides interaction with customers. Through the enactment of this mission statement, as well as through increased personal engagement, lenders will build a brand millennials trust—and one to which they’ll happily give their business.
Ultimately, a lender appeals to millennials by showing it cares about them, whether through a mission they believe in, personal attention, or an application process that caters to their digital comfort zone. Millennials currently occupy a unique market space in that they don’t know they’re a market. A Fannie Mae survey shows the majority of millennial renters want to own a home but don’t believe it’s affordable. Yet with the skyrocketing costs of rent in the metropolises many millennials occupy, most would spend less on mortgage payments than they would on rent. This provides an opportunity for the mortgage industry: there exists an even greater market for mortgages, and it’s up to lenders to tap into it. With the spending of millennials set to eclipse that of baby boomers by 2018, modernizing towards their needs may soon become vital.
- Lana Gorlinski