Let’s face it: it’s tough out there for homebuyers. Some may argue it’s downright heartbreaking. According to a recent survey from Zillow, 50% of homebuyers said the home-buying process left them in tears, with millennial and Gen Z buyers reporting this at higher levels than their older counterparts (61%, millennials; more than 65%, Gen Z).
Last year’s housing market put would-be homebuyers through the wringer. Record-low inventory, an unpredictable rate environment and homes selling for two, three, four times (and more!) over asking price were just a few of the stress-inducing factors, particularly for first-time buyers.
Working in the origination and real estate product and services space for more than 20 years, I have weathered the highs and lows of the industry. I know some of my colleagues and friends on the mortgage lending side also have experience and hindsight on their side. We know the ebbs and flows and can recall even tougher rate environments. With that said, we cannot expect one of the fastest-growing cohorts of buyers – millennials and Gen Z – to approach the market with the same levelheadedness.
As rates continued to climb month after month throughout 2022, ending the calendar year at 6.42% for a 30-year fixed rate mortgage per Freddie Mac’s Primary Mortgage Market Survey, many young buyers decided to put the pause on their home search.
Adding insult to injury, low inventory and inflated home prices – while leveling off – continue to make it challenging for first timers to compete with all-cash buyers and older generations who may not be as rate sensitive. Speaking to their competition: 55- to 74-year-old homebuyers took the top spot for the largest cohort of homebuyers in 2022. That’s surprising because millennials previously led the charge in 2020 and 2021, according to the National Association of Realtors (NAR) 2022 Profile of Homebuyers and Sellers.
Even with all that is stacked against them, many young buyers are not breaking up with the real estate industry just yet. Lenders can play a role in ensuring young homebuyers are feeling supported and can make the home purchase process less heartbreaking for them in the following ways:
Anticipating their needs & being a source of education
Determine how you, as a lender partner, can anticipate the needs of your young buyers, many of whom may be going through the home purchase process for the first time. How can you educate and prepare them for the process to drive greater satisfaction while gaining their trust?
First-time buyers, especially, may not be aware of the type of documentation and information they will need to pull together when applying for a loan. Educate them on what information they need to bring to the table to make the process run smoothly – from tax returns to W-2s – in addition to explaining various loan options and helping them understand which loan type might be best suited for them.
Knowing this demographic does just about everything online, make sure your website is up-to-date, easy-to-navigate and chockfull of sound advice on which they can lean.
Being transparent
A transparent homebuying process drives greater consumer satisfaction and self-service options help to increase transparency. Lenders should consider collaborating with external partners who can help facilitate self-service options during key milestones in the home purchase process.
For example, giving borrowers the option to book the exact date and time of their appraisal in an easy-to-use, online portal, or the option to fill out forms virtually can help increase transparency while speeding up the process. Additionally, more visibility into rates and exclusive offers for first-time buyers will also help you earn your borrower’s trust when making one of the largest financial decisions of their lives.
Giving them tech options
Today’s youngest homebuyers have big expectations when it comes to the purchase process. Whether they are placing a food order online, leveraging a ride-share app to get to the airport or placing a mobile grocery order, technology impacts every facet of their lives. The home-buying experience is no different in their minds.
According to my company’s 2022 State of Homebuying Report (SOHBR), Gen Z and millennial homebuyers said convenience/ease of use (66%), time savings (60%) and flexibility to make progress on their own schedule (53%) were the top benefits of leveraging technology during the home-buying process. They crave seamless transactions and expect the home-buying purchase to go just as smoothly. But do not forget to give them the option to speak to someone live, over the phone, if they are looking for a multichannel communication approach.
Taking stressors off their plate
Millennial and Gen Z buyers crave convenience. According to findings from the same survey report, when asked what they would change about the home-buying process, less paperwork (40%) and not having to provide the same documentation multiple times (28%) topped their wish lists. Consider which parts of the origination process you can further automate to reduce stress and speed up the process on the buyer’s end.
Checking in with them during key milestones in the home-buying process
While young borrowers are willing to take a self-serve approach, they do not want to do everything alone. They still lean on trusted allies to help them through the process including their lender, realtor and family and friends. In fact, 26% of millennial/Gen Z respondents leaned on their lender for advice when beginning the home-buying process, demonstrating that lenders can still serve as a key source of education for young buyers (2022 SOHBR).
Checking in with them during key milestones in the process, which may be sources of stress and confusion to them, such as after the loan pre-approval and final approval to see if they need support or have any questions can go a long way. Additionally, when engaging a third party for your valuation services, ensure that the borrower is aware that a representative from another company will be in contact with them.
With cases of fraud during the origination process on the rise, borrowers are more cautious than ever (and rightfully so). To that end, make sure that your third-party providers are secure and compliant and take customer privacy and security just as seriously as you do.
Matt Woodhouse is managing director, valuations at ServiceLink, the nation’s premier provider of digital mortgage services to the mortgage and finance industries.
