Opinions on where real estate prices are headed from here might be mixed, but one thing is becoming increasing clear: Millennials will be a big part of it. According to a recent survey from the National Association of Realtors (NAR), the so-called millennial generation comprised the biggest segment of home buyers last year. The survey found these 18-34 year olds made up 32 percent of the market last year and 31 percent of the market the previous year.
For brokers, this emerging segment represents the future of the real estate industry and courting them requires a different approach than doing business with members of previous generations. Diane Cummins, immediate past president of the Hudson Gateway Association of Realtors says “they are going to be larger than even the Baby Boomers. There are more of them and if they all become home buyers, it is going to be a remarkable clump of business”.
This generation of home buyer is unlike any other that the veteran real estate broker has dealt with. For one thing, they typically come to brokers with their research done through internet searches and online searching tools. “They are totally technology driven” says Cummins. “They do their own research but they rely more on brokers than any other buyers”. Millennials are very busy and more importantly, they believe that everybody has a role. They know what they like and prefer to “direct the brokers” where they want to focus their search.
Many of the millennials buying homes now graduated college around 2007. They were riddled with student loans and finding a job in their desired career path was difficult. Moving in with Mom and Dad or renting were their only options. Living at home made it easy to save money for a down payment and rents have drastically increased so it makes sense for them to get into the real estate market now. New Federal Housing Finance Agency policies are taking hold, which will incentivize millennials even more. The 3% down payment program which is available to most buyers who haven’t owned a home in at least 3 years, was echoed by Fannie Mae and Freddie Mac at the end of last year. Additionally, mortgage insurance rates on an FHA loan were cut to .85 percent, down from 1.35 percent-an average savings of $1000 per year.
The new low down payment mortgage program will save creditworthy borrowers who lack the resources for substantial down payments plus closing costs while mitigating risk with strong underwriting says NAR President Chris Polychron. The millennials are certainly a segment to watch closely and a “niche” that some brokers will definitely want to target.