Just as music preferences and social norms shift from generation to generation, so do home buying habits.
In recent years, Millennials have made up the largest percentage of homebuyers.[i] As more Millennials and Gen Zers make their way into the housing market, it’s important for lenders to tailor their customer experience to suit the unique needs and preferences of NextGen consumers.
In this article, we’ll describe the concerns and priorities shared by NextGen homebuyers. We’ll also explain how to enhance their customer experience as a lender.
Table of Contents
Homebuyers By Generation
To start, let’s take a look at the share of homebuyers from each generation in 2022:[ii]
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- Gen Z – 2%
- Millennials – 43%
- Gen X – 24%
- Baby Boomers – 42%
- Silent Generation – 6%
As you can see, Millennials and Gen Z combined make up a majority of the homebuying population and this number will only continue to grow as Gen Z continues on their journey into adulthood.
While Baby Boomers are still active participants in the housing market, compared to younger generations, Baby Boomers are more likely to have the capital to buy homes in cash. In contrast, Millennials are more likely to rely on mortgages.
NextGen Home Buying Trends
As Millennials eclipse Baby Boomers as the dominant homebuying generation, lenders need to familiarize themselves with their homebuying attitudes.Here are a few things to take note of in regards to Millennial and Gen Z homebuyers:
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- They prefer digitization – NextGen homebuyers have been immersed in the internet, smartphones, and social media for the majority of their lives. As digital natives, they feel more comfortable using digitized processes during the home buying process than previous generations..
- They’re generally distrustful of lenders and other institutions – From the media to the government, distrust in institutions is at an all-time high.[iii] Financial institutions are no exception. A survey of Millennials found that 92% don’t trust banks.[iv] What’s more, two in three NextGens don’t think lenders are trustworthy or reliable.[v] With these stats in mind, winning over NextGens’ trust as a lender may feel like an uphill battle.
- They lack confidence in the home buying process – Lastly, many NextGens don’t feel like they have a strong grasp on the home buying process. In fact, 20% of surveyed NextGens said they didn’t feel confident in any step of it.[vi] What’s even more startling is that only 24% of Millennials can pass a basic financial literacy quiz.[vii]Considering the glaring absence of financial courses in high schools and colleges, this doesn’t come as much of a surprise. However, it does mean that lenders may need to pick up some of the educational slack.
Home Buying Preferences Of NextGen Consumers
Not only are NextGens’ home buying concerns different from their older counterparts, but so are the types of homes they want to buy. Many NextGens have been prioritizing the following factors when purchasing homes:
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- Affordability – Buying a starter home today is more expensive than it was for past generations. In the past 50 years, housing prices have outpaced inflation rates, while incomes have remained relatively stagnant. In fact, home prices have spiked 118% since 1965, Meanwhile, income has only gone up by 15%.[viii]In light of these facts, Millennials and Gen Z’s are facing a very different housing market than their predecessors did at their age. In turn, NextGens’ are setting their sights on more cost-effective properties, such as:
- Condos – Condos are typically cheaper than single-family homes. For the notable portion of NextGen homebuyers that are choosing to start families later in life, a smaller space may make for a more practical starter home. Not to mention, condos eliminate the added expense of upkeeping a backyard, roof, and many exterior structures. However, many condos have an HOA fee, so be sure your borrowers calculate that into their monthly payment.
- Affordability – Buying a starter home today is more expensive than it was for past generations. In the past 50 years, housing prices have outpaced inflation rates, while incomes have remained relatively stagnant. In fact, home prices have spiked 118% since 1965, Meanwhile, income has only gone up by 15%.[viii]In light of these facts, Millennials and Gen Z’s are facing a very different housing market than their predecessors did at their age. In turn, NextGens’ are setting their sights on more cost-effective properties, such as:
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- Multi-family units – Another option NextGens are exploring at higher rates are multi-family units. These types of properties allow homebuyers to use some rental income to help pay down their mortgages and pad their incomes. Not only are NextGen homebuyers renting these properties for income, but many are living in one unit of the home and renting out others.
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- Work-from-home amenities – The COVID-19 pandemic has influenced home buying attitudes for all generations, NextGens included. As remote work becomes more common, many Millennials and Gen Z buyers may want a home that can comfortably support a work-from-home lifestyle.While many NextGens may need to settle for smaller homes due to cost constrictions, they may still desire more square footage if they plan to work remotely. After all, when home doubles as your office, you need to carve out a quiet space where you can be productive.
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- Flexible locations – Another consequence of the rise of remote work is that many NextGens may not be tied to a specific town or city. For these digital nomads, the entire country may feel like their oyster. This subset of homebuyers may shop for a home entirely online, relying on virtual home tours and real estate Zoom meetings to facilitate the process. Additionally, the lack of a physical office space is driving more young buyers to look at options in less expensive suburbs rather than pricy metropolitan living.
How to Provide a Better Customer Experience For NextGen Consumers
Now that we’ve discussed some unique shifts seen with NextGen consumers, let’s take a look at how you can optimize their customer experience. Kristin Messerli of Experience.com lays out these three key elements:
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- Education – Since many NextGen homebuyers have insufficient education surrounding finance, homebuying, lending, and credit, it’s important to lay that foundation for them throughout your relationship.
- Empathy – Buying a home can be an emotional experience. Showing empathy can help you earn borrowers’ trust and make them feel safe. One simple way to put this empathy into action is to touch base with your borrowers at meaningful moments throughout their home buying journey. Your timely touch points can offer them the reassurance they need for a positive customer experience.
- Empowerment – Through the right combination of education and empathy, you can empower your borrowers to make savvy financial decisions they feel confident about. You can give them the skill set that they need to succeed in today’s homebuying environment.
With these elements in mind, let’s take a look at three valuable tactics to reach and convert NextGen consumers into loyal borrowers:
#1 Embrace New Technologies
Older generations may happily come to your lending office in person to fill out loan applications, attend meetings, and sign closing documents. However, NextGens prefer a hybrid experience.
If you haven’t digitized your workflows yet, many NextGens are more likely to pass you by for lenders that have. Some tech solutions worth embracing include:
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- Automated online prequalification
- Online mortgage applications
- Automated verification of income and employment
- Zoom meetings
- E-closings
- Virtual home tours
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#2 Cultivate Trust Through Transparency
Overcoming the obstacle of distrust is crucial if you want to capture more of the NextGen mortgage market. Here are a few tips for earning NextGens’ trust:
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- Set clear expectations about the lending process from the very beginning
- Provide ample resources for lending education
- Share educational content online to establish yourself as an industry expert
- Answer customers’ questions promptly and warmly
- Offer additional educational opportunities, such as first time homebuying seminars
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#3 Provide Helpful Educational Content
As a financial professional, you’re uniquely qualified to bridge the educational gap for NextGen borrowers.
Some strategies you can employ to teach NextGens about home buying include:
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- Search engine optimized (SEO) blog articles – Where do most people go when they want to learn something? By optimizing your educational content for Google’s search algorithm, you can simultaneously teach borrowers and market yourself as the best lender for their next home purchase.SEO content creation simply involves writing blog articles that address the types of questions your borrowers may be typing into Google, such as “how to apply for a mortgage” or “how to raise my credit score.”
- Youtube videos – While NextGens may be known for spending hours scrolling on Instagram and Tik Tok, Youtube is their go-to source for financial education. Over 55% of NextGens said they’d head over to Youtube before other social media platforms.[ix] You can develop a presence on Youtube by transforming some of your blog articles into helpful videos.
- In-person education – NextGens may live online, but they still value a personal touch. You can use your phone calls, emails, and meetings with them as educational opportunities too. Simply share your insights on relevant topics as they arise. Most importantly, always be open to answering your borrowers’ questions and direct them to additional resources as needed.
- Partner education – Lastly, don’t forget to share market insights with your partners in the industry. Your borrowers will most likely interact with real estate agents, insurance, companies, appraisers, and home inspectors during the homebuying process. By educating these partners, you can ensure that your borrowers receive consistent information from all sources.
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By providing your potential customers with a foundation of financial literacy, you can enhance their confidence as they go forward and apply for mortgages.
#4 Offer Helpful Investment Calculation Tools
Over 20% of NextGens fear that their home won’t be a good investment.[x] With so much housing market volatility, it can be difficult for young people to determine whether renting or buying is better.
You can make this process easier by offering a rent vs. buy comparison calculator. Let them see for themselves how owning a home may help them build their wealth over the next few years. You can also create a similar type of calculator to showcase how refinancing may be a smart financial move in the future.
By backing up the returns of home investments in hard numbers, NextGen homebuyers can enter the market with confidence.
Certified Credit: Innovative Mortgage Lending Solutions to Help You Reach the NextGeneration of Homebuyers
NextGen homebuyers are a unique subset of consumers who require an innovative approach. As a mortgage lender, you can find success with this emerging market of borrowers by attuning your tactics accordingly.
If you’re looking for more tips and tricks for mortgage lenders, Certified Credit has you covered. In addition to our industry insights, we also develop cutting-edge solutions for mortgage lenders. Our ever-expanding suite of solutions includes:
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- Affordable credit reports
- Credit score improvement tools
- Automated lead generation tools
- Automated prequalification
- Automated verification of income and employment
- Property and valuation tools
- Fraud and risk support
- Underwriting compliance support
- Settlement services
For instance, our latest solution, Cascade Leads, can help you reach NextGen homebuyers with ease. This mortgage marketing tool can identify aspiring homeowners who meet your eligibility criteria from databases of millions of credit consumers. It also features automated AB testing capabilities, so you can optimize your campaigns as time goes on. Thanks to its precise targeting and advanced personalization, Cascade Leads can enhance your marketing ROI considerably.
To learn more about Cascade Leads and our other products and services, schedule a credit consultation with our team today.
Sources
[i] National Association of Realtors Research Group. 2022 Home Buyers and Sellers Generational Trends Report.
[ii] National Association of Realtors Research Group. 2022 Home Buyers and Sellers Generational Trends Report.
[iii] Forbes. Trust In U.S. Institutions Hits Record Low, Poll Finds.
[iv] HousingWire. Millennials don’t trust lenders or the housing market – So how do we reach them?
[v] Experience.com. 2021 NextGen HomeBuyer Report.
[vi] Experience.com. 2021 NextGen HomeBuyer Report.
[vii] Insider. Only 24% of Millennials are financially literate. If you can pass this quiz, you are, too.
https://www.businessinsider.com/not-all-millennials-are-financially-literate-pass-this-test-2019-4
[viii] CNBC. Home prices are now rising much faster than incomes, studies show.
[ix] Experience.com. 2021 NextGen HomeBuyer Report.
[x] Experience.com. 2021 NextGen HomeBuyer Report.
