Troy Palmquist is an indie broker in California with more than a decade of experience. His regular column, which covers a range of helpful tips for agents and op-eds on industry happenings, publishes Thursdays on Inman.
Inman’s recent hot-button post “’Monopoly for Millennials’ hits shelves, sans real estate” got me thinking. How can we as agents better serve millennials and get them into homes?
Although Monopoly for Millennials — the latest iteration of the classic Hasbro board game in which players rack up experiences instead of real estate — pokes fun at the millennial generation, their impact on the housing market is no laughing matter.
Forbes contributor Neil Howe, who coined the term “millennial generation,” presents a compelling case, asking the very question that is top-of-mind for every real estate office across the country: “Are millennials killing the U.S. housing market?”
According to a 2017 report by the National Association of Realtors, there are six major real estate trends transforming the way we live, and all of them point to millennials.
These shifts include “surban” being the new suburban, a trend in which millennials are choosing so-called surban areas, or those with a mix of suburban and urban features, over the sprawl, strip malls and highways of their childhood.
Coupled with the expansion of tech jobs on a national scale and the growing acceptance of telecommuting, it is no surprise that millennials who are on the move are choosing areas with a lower cost of living. Not to mention the distinct behavioral differences that influence their purchase decisions.
Millennials are wildly different than the baby boomer generation. Perhaps Howe puts it best saying, “Today’s young adults are no longer rushing to set out on their own — and their parents are no longer yearning for an empty nest. Barring a drastic reversal in this trend, the housing market will have to cope with sustained slow growth for years to come.”
However, millennials are still the largest age group of homebuyers. NAR reports, “While debt may be holding them back from entering the housing market, it is prompting them to consider more affordable neighborhoods.”
Here, I offer three key areas agents should consider as we tackle the tricky millennial marketplace.
1. Don’t ignore the avocado toast theory
Millennials are waiting longer to buy. Some may be hesitant. Others are drowned in student loan debt. Most are skipping out on starter homes and saving for a greater investment to suit their lifestyle. This is in line with my “avocado toast theory” in which millennials would rather spend $12 on sprouted bread and avocado, than sacrifice quality for something subpar.
And millennials are taking the same approach when buying a new home. They want it all — the space, the location, the amenities. But there’s one problem. The price.
According to NAR, 63 percent of millennials say the high price of a down payment and mortgage costs are preventing them from buying. But do they know their options?
With half of all buyers under the age of 36, and first-time homebuyers responsible for 47 percent of all purchases, it’s worth taking a look.
The best thing you can do as an real estate agent is try to present homebuyers with the best options.
As Bernice Ross points out in her article, “The cost of buying a home today vs. a year from now“:
Consumers are aware that interest rates are increasing, but very few understand how costly these seemingly small increases can be over the life of a 30-year mortgage. If your buyers are reluctant to buy now, they need to rethink their position. And it’s your job explain why.
Experts believe that interest rates will increase by another quarter point before the end of 2018 and that another three rate hikes will follow in 2019. This means today’s rate of 4.85 percent could be 5.85 percent a year from now.
This one-point increase is much, much bigger than most people realize, costing borrowers up to 23 percent more in terms of interest paid over a 30-year mortgage. Depending on the size of the loan ($400,000-plus), that amount could easily exceed $100,000 or more in additional interest.
Pointing out market intricacies and showcasing your knowledge can help get millennial buyers off the fence.
2. Position yourself as a resource
Although there’s a large percentage of millennials primed to enter the housing market, most younger adults believe they are not able to afford homeownership because of student loan debt, high rents and cost of living. But they can!
Educating millennials on FHA or down payment assistance programs, gift money from a family member and a good lender can help. Lenders have great programs to suit a variety of needs, and they can typically help out with the escrow closing costs by building it into the loan or interest rate.
Educating millennials on their financing options could be one of the most important things we do to shift the balance.
3. Get creative with marketing
If you aren’t influencing in your market, then you are behind the times. Millennials are internet savvy. They do their research online. And above all, they look to social media influencers to make their purchasing decisions.
Studies show that millennials rely on referrals from friends and family, reputation in the local neighborhood and local neighborhood expertise when considering an agent or brokerage. This presents a big opportunity.
Position yourself as a resource and trusted adviser with knowledge of the millennial market. Partner with local or national influencers to get your name and brand out there. Write editorials or blogs for newspapers and real estate focused websites to gain exposure.
Help drive the conversation around millennial homeownership, and boost the idea that there is more than one way for millennials to enter the market.
Taking these first few steps toward understanding millennials, educating millennials and strategically marketing to millennials will set you apart as an agent and keep you fresh when that millennial buyer comes calling.