Millennials, by the numbers, are the largest generation. There are 72.1 million of them in the United States. And they have an annual purchasing power of $200,000,000,000 (that's two hundred billion dollars)! But even with those kinds of numbers, the fact is that the Boomers are the focus of lenders' marketing. Why? Because baby boomers are still the age group that buys the most homes. And the jump in Refinance Mortgage Rates has deterred boomers from taking on more debt. And with the rise in interest rates for first mortgages, brokers and lenders need more customers. They are also in a cost-cutting mode: Using Mortgage Technology for Mortgage Loan Processing and Outsource Mortgage delivery. But another tactic has to be getting more customers. How, then, do you attract the millennials, and get them into a Millennial Home Mortgage.
Research data tells us millennials want a piece of the home market. Pew Research polls indicate millennials want to marry, have a family, own homes, and save for retirement. The difference between millennials and boomers is that this happens later in life for them.
If ever there was a generation comfortable with using new mortgage technology, it is the millennials-things like Artificial Intelligence and Machine Learning. Literally growing up with computers, smartphones, and the internet, no other generation has embraced this new tech like the millennials.
"The Use of AI in loan processing is surging! Artificial Intelligence (AI) is the computational model of human behavior and thought processes. The algorithms learn how individuals behave and replicate that behavior. Also called "Machine Learning" (since a machine is learning how to act like a human), AIs used in the mortgage loan process promise:
Doing a refi and using some of the equity value converted to cash to cover home improvement costs or some other use for the money. The issue for millennials is how much equity have they accumulated? We know they get into a home later in life than different generations, so they probably have less equity.
But playing an even more significant role is the uncertain economic outlook as of 2022. Is the US headed for a recession? Is inflation really restraining most people's ability to pay their bills? And if so, what will be its effect on home sales? We can see the early results as of June 2022: a steep purchase decline and a dramatic increase in mortgage rates. The average mortgage rate in June of 2022 is twice the rate from a year ago!
As rates increase, we expect refinance volumes to decline. However, as borrowers seek to extract equity from their homes, a large share of refinance activity is expected to be cash-out refinances.
So how can lenders and brokers overcome all these obstacles and encourage millennials to enter the housing market?
Play to your strengths. Your greatest resource may be standing right in front of you. What is it? Your sales force. They've been on the front lines through the craziest market fluctuations in decades and have an excellent idea of what potential buyers think about the process.
And don't forget that the same things that attract millennials to paperless mortgage processing can work to a lender's advantage. How? It's faster, less expensive, and offers a smaller chance of error. But make sure they know their options and how they can qualify.
Get Moving Today!
Let's face it. Mortgage rates keep climbing, so lack of action only costs money. Lenders must keep emphasizing to millennials that the sooner they move, the better the result. It stands to reason that higher prices will lead to lower sales, so lenders need all the arrows in their quiver to remain viable in a smaller market with smaller profit margins.