Emerging Markets And How To Reach Them

Emerging Markets And How To Reach Them

These generations need a little extra help but it’s worth the effort.

BY CHRISTIAN OLIN SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL

With interest rates as low as they are and additional contactless home loan services available, now is a great time to appeal to emerging and new markets for your business. Marketing to different groups of home buyers comes with concerns and challenges, since each group is unique.

From millennials looking to buy their first home to Baby Boomers thinking about downsizing but feeling hesitant, these markets need a little extra help in the right direction. By recognizing your buyer’s desires and fears, you can tailor your approach. The kind of help each group needs differs, so understanding the unique qualities of each demographic is critical if you want to reach them.

MILLENNIALS

Millennials are an emerging market that is only growing as even younger millennials are graduating from University or looking to move from their hometowns. While the average age for first time home buyers has increased over the past decade, homeownership is a goal for nearly all. In fact, over half of millennials hope to own a house in the next five years. The novel COVID-19 has sped up this influx, making now a great time to convert renters into homeowners.

One of the biggest aspects holding millennials back from homeownership is lack of knowledge about the mortgage process, and the additional fees associated with purchasing a home, such as closing costs. However, more than half pay over 30% of their income on renting, meaning homeownership is more in arms reach than they think.

Another factor is the common millennial belief that owning a home will require them to stay put in one location for a long time. Consider comparing the costs and benefits of renting and homeownership to understand how to guide millennials to financial success.

The key to reaching this market can be done by presenting a streamlined, transparent mortgage lending process since they are most likely to be first-time homebuyers. Also, a down-payment assistance program could help make a millennial’s homeownership goals possible. Look to cities such as Seattle, Denver, or Austin, which have all seen a net increase of over 5,000 new millennial residents based on the 2018 census.

GENERATION X

Another group to consider targeting is Generation X. While Gen Xers may not typically be considered an emerging market, they are often overlooked as home buyers. The children of Baby Boomers have quietly become the country’s top earners. As the group that suffered the most financially from the 2008 housing crash in their early homebuying age, they are now ready to move up.

Currently, the 65 Million that make up Gen X are buying the highestpriced median homes. This market is also attractive since they are probably not first-time home buyers and won’t need quite as much hand-holding through the loan and mortgage process.

To appeal to Generation X, it is imperative to understand their housing desires and where to find them. Assist them in their home search by presenting homes with an abundance of storage, proximity to parks for their kids, and a nice yard as these things are all high on the Gen X list of what they are looking for.

Shy away from homes with formal living and dining rooms as it does not fit their lifestyle quite like their parents, making these rooms unnecessary. The majority of Gen-Xer kids still live at home and these home features don’t fit into their busy days.

Similar to Millennials, Gen X also highly values community involvement in their neighborhood. The top desirable cities for Gen X includes Miami, Atlanta, and San Francisco. Some of the best ways to get in touch with those in their 40-50s is through direct mail, online email, and Facebook.

BABY BOOMERS

Another market to pay attention to is Baby Boomers. Baby Boomers own a third of the houses in America and millions are looking to downsize. They are rapidly looking to move closer to their adult children, therefore, opening a new market. Boomers are feeling hesitant to move because of the rising housing costs and they’re comfortable with the equity in their current residence.

While some Boomers consider aging in place, their older current homes are often not equipped with wide enough hallways, showers, staircases, and of course, proximity to their children to help out as caretakers. Boomers are going to face a competitive housing market, the same one that their millennial counterparts have been struggling in. There are ways you as a lender can assist them.

The struggle Baby Boomers are experiencing can be a great way for you to step in and use your expertise. A reverse mortgage or HECM, which is the most common type of reverse mortgage insured by the FHA, can help those who are 62 or older use a part of their home equity without moving to make home improvements. A HECM can also help in buying a home. Another possibility to present to Baby Boomers is the option of taking out a loan against their own home equity to help make accessible modifications.

Keep in mind, Baby Boomers have their eyes on sunshine-filled cities including Las Vegas, Austin, and Mesa. If these are regions you are considering targeting, do not overlook Baby Boomers because of the struggle they are facing due to rising housing costs for smaller homes and limited retirement savings. There are loan options that can work for them. Focus on accessibility and you may just win over this generation.

While not all of these varying generations are typically considered an emerging market, a large portion of prospective home buyers are being overlooked, and each for different reasons. With new social distancing protocols, there has been a shift in many renter’s mindsets towards homeownership. Another factor making now a great time to reach new markets is low mortgage rates for conventional 30-year loans.

By understanding the housing goals of each market and honing in that respective region, you will be on your way to great lending success.

Christian Olin is vice president of direct lending for On Q Financial.