We haven’t had a spring homebuying season like this in a decade.
On the plus side: The economy and wages are growing (slowly) and housing demand and construction are up. On the minus side: The mix of rising home prices, rising interest rates compared to last year, and low inventory has made homes less affordable. Those clouds might make it a bit harder for business to grow. But lenders and other housing professionals can take steps to cultivate their success.
1. Think about three generations of buyers, not just Millennials. Millennials are a vital market, of course. The leading edge of that generation is in their 30s now – historically, prime homebuying territory. We’ve all read reports, though, that Millennials are putting off buying homes for a variety of reasons. But studies show that the majority view homeownership as a good thing. And based on research by Freddie Mac and Experian, 24 million Millennials are mortgage-ready today. On top of that, Freddie Mac’s latest Profile of Today’s Renter research revealed that one-third of all respondents plan to move within two years. Of those aged 18-24, 27 percent plan to buy; that number jumps to 50 percent for those aged 25-34.
What we sometimes forget is that Baby Boomers still dominate the market – 69 million of them own homes. Of those responding to the Freddie Mac 55+ Survey, 40 percent plan to move at least once more – 13 percent of them within four years. One-third of Boomers responding to our renter survey who plan to move expect to buy their next home.
Between the Boomers and Millennials, the smaller Generation X deserves attention. Gen Xers made up 26 percent of the purchase market in 2015, according to the National Association of Realtors (NAR). Most were move-up buyers; 26 percent bought their first homes. More than half of Gen Xers responding to our renter survey said they expect their next move to involve buying a home.
2. Know down payment fact from fiction. The myth that a homebuyer must make a down payment of at least 20 percent keeps hanging on – like the one kids have told each other for years that eating popping candies and then drinking soda will make your stomach explode. Neither is true!
According to NAR, the average down payment among first-time homebuyers in 2016 was 6 percent, and 14 percent for repeat buyers. It’s possible to put down even less.
Importantly, the homebuyer doesn’t need to come up with the down payment from savings alone. A range of down payment assistance options are available.
3. Stay informed. Mortgage-related products, policies, and technologies constantly are being enhanced or developed to meet changing market needs. Stay up-to-date on the latest so that you understand the options and opportunities available.
4. Educate homebuyers. In turn, share your knowledge to help homebuyers make informed, responsible decisions and to help make the buying process smoother and easier. Homebuyers – especially first-time buyers – look to housing professionals for advice and moral support. Based on what you learn about a buyer through your conversations:
The likely reward: Positive buyer experiences that could yield business now – as well as repeat and new business in the future.
5. Collaborate across the industry. We all do more and better business when we work together. Sharing information and coordinating across real estate professionals, lenders, housing agencies, and housing counselors, with a focus on supporting the buyer’s journey toward homeownership, will lead to real business benefits.
6. Use the whole credit box. The credit box doesn’t need to be wider. Rather, more of it needs to be used. Given today’s eligibility standards and tools, lenders should feel more confident making loans to homebuyers with qualifications ranging from one side of the credit box to the other.
To promote your success, Freddie Mac constantly works to provide greater certainty, smart solutions, and comprehensive support. Some examples:
Freddie Mac is committed – now and always – to helping to expand responsible, sustainable homeownership. You can count on us in spring and every other season.