The best way to start is to find new and different ways to appeal to your target audience, as well as the ones who are falling through the cracks in your system
Millennials will make up more than 50% of mortgage originations in 2020, according to the Realtor.com housing forecast, creating a big opportunity for lenders who are able to appeal to this demographic.
“Millennials are among the most educated generation in the U.S. today, but many of them are saddled with student debt, so they are putting less money down on their first-home purchase compared to other generations,” said Realtor.com Senior Economist George Ratiu on a recent podcast. They are also taking out larger mortgages because they are skipping the traditional starter home due to low supply, he added.
This year, millennials are moving out of urban areas and into the suburbs and small towns. This is because they can’t find a house they want within their budget, pushing new homebuyers outward.
“In 2020, we are seeing a definite shift toward affordability, away from the core,” Ratiu said. As baby boomers retire, they are also looking to relocate to homes in cities with lower costs and lower taxes, he added.
Buyers will have more opportunities as new construction grows, housing prices flatten and interest rates remain attractive, according to the report.
“I don’t see the market turning entirely in favor of buyers because inventory levels are so low, and supply of new homes remain well contained. We are undersupplied across the country to the tune of around 5 million homes,” said Ratiu.
Mortgage rates are likely to bump up to 3.88% by the end of the year, and due to this and tight inventory, the report suggests home sales will see a decline.
CEO of Opcity Ben Rubenstein offers some expert advice for lenders as they plan for the rest of 2020.
Balance your team
Diversifying your team will be extremely important in 2020. Some lenders are all refinance or all home purchase, which could be dangerous.
“Diversify by cross training, so people are able to do both and are flexible. If you have a larger team, make sure the team is balanced with both,” said Rubenstein.
The refi market was really hot in 2019 so lenders could depend on that, he added, but as rates flatten out this year or even potentially go up a bit, there needs to be a more balanced approach.
Create an online strategy
More consumers are starting their process online, rather than with an agent or even a trusted friend.
“There’s a big opportunity for lenders who can cater to millennials through their ability to contact them and communicate with them the way they want to be communicated with – quickly, digitally and seamlessly,” said Rubenstein. They have very different expectations and are used to getting information right away and so they expect service right away as well, he said.
Rethink lead purchasing
As leads are sold more and more times, they become less valuable, said Rubenstein. According to realtor.com, 78% if customers purchase from the first person who reaches out to them and it’s well known across the industry that there’s only about a one percent close rate for online leads.
“That’s a lot of time, work and money being spent on online leads for not a lot of value. Plus, if a lead is not contacted within 5 minutes, the close rate drops by over 400%,” said Rubenstein.
He recommends finding creative ways to reach out and interact with someone online that isn’t just a name and a phone number.