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The Great Property Divide

Editor's note: This piece originally appeared in the April edition of the MReport, available online.


As winter turns to spring, people begin to reflect on their lifestyle and make promises to themselves—”I’m going to spend more time outside,” “this year I’ll finally clean out my storage unit,” or “I’m going to host my friends more often.” The promises I hear the most, however, is often related to their home—”this is the year we upgrade to a bigger place,” “I’m going to start that kitchen remodel” or simply, “I’m finally going to buy a home of my own.”

As experts in the home finance industry, it’s important to take a step back and ask who will be making moves this year? What will they be looking for in a home? How will they pay for it? And most importantly, how can I make the process easier for them? The next person that walks through the door may be looking to move to their dream home with space to have their children and grandchildren visit or maybe they are looking to fall back in love with their home by updating it. They might even be the new kids on the block looking to buy for the first time.

Homebuyers now span several generations and genders: Generation Zers, millennials, Gen-Xers and baby boomers, male and female, are all taking steps forward in their homeowner journeys. As industry professionals, it is essential to be in-tune with the uniquely diverse situations each group brings to the table—no matter the stage—it is essential to know how to best meet clients’ needs and to understand that one size doesn’t fit all.

Baby Boomers: On the Move

As boomer’s head into the next phase of their lives, they are faced with a major question: does their home still fit their needs? According to the U.S. Census Bureau, there are roughly 77 million baby boomers aged 55-73 years old, and for many, their children have moved out of the house and retirement is on the horizon. This could mean looking for a smaller, lower-maintenance home, a larger home to welcome younger generations or even a new home in a warmer climate. No matter the reason for their move, as a trusted adviser, it is important to understand their reasoning and goals so you can guide them through the process and connect them with the right tools and resources.

This generation of clients may not be familiar with the digital resources that are available to them, such as mobile mortgage applications and tracking tools. To facilitate a more enjoyable and efficient experience, be sure to introduce boomers to these self-guided resources where they can get comfortable exploring options on their own time. Once they get acquainted, they will be able to take advantage of efficiencies that might not have existed the last time they purchased a home.

However, not all baby boomers are looking to move. Some may be looking to hold tight to the memories and traditions that have been established in their current home, but they want to make changes and updates. When moving to a new house isn’t the right fit, remodeling can be a great option. Maybe it is opening and expanding the kitchen to connect with the living room so that everyone can be together during family gatherings. If this is their path, then they may be taking a page out of the Gen-Xers book.

Gen Xers: Staying Put, But Making a Change

Gen X is often overlooked since this group is significantly smaller than other generations. However, in their
peak earning years and with more spending power than any other generation—according to digital marketing group Centro— they’re not a group to dismiss. Gen Xers are in a different life stage compared to other generations as the majority are married with an average of 2.5 children, according to Eclipse Marketing Services. With growing families and changing needs, many Gen Xers are considering how they can make their current homes better fit their families.

In addition to personalizing and adding value to a home, remodeling can be a great alternative to moving—especially for those that love the perks of their area, such as a great school district or proximity to friends and family. Beyond making aesthetic alterations, this generation is also considering their future needs when planning changes to their home. They want to make it work for their lives now and in the future to bring resale value if they decide to move. However, when it comes to how to fund these home renovations, many Gen Xers aren’t aware of the financing options available to them, such as home equity lines of credit (HELOC), which can be an affordable and flexible option.

According to a recent HouzzBank of America study, U.S. homeowners who leveraged secured financing to pay for renovations in 2017 were able to take on larger home improvement projects, with nearly three times the median spend of those who paid for renovations with cash-only ($32,000 versus $13,000). Of the available secured financing options, HELOCs are the most commonly used (47 percent), which was attributed to ease of use (39 percent) and low cost (38 percent). But not everyone is in a home of their own that they can make changes to, particularly renters or those looking to buy for the first time.

Millennials & Gen Zers: Taking the First Step on the Property Ladder

As an emerging force in homebuying, millennials and Gen Zers are jumping into the housing market. The 2018 Homebuyer Insights Report (HBIR) found that 72 percent of millennials are prioritizing homeownership over other life goals, such as marriage (50 percent) and children (44 percent). Additionally, more than threequarters of Gen Zers are willing to sacrifice running their own business in favor of owning their own home according to Dash Mortgage.

Despite this, younger generations can and should be cautious about the homebuying process, especially when thinking about the money they have, or more so don’t have, saved for a down payment. To help reduce this anxiety, it is important to discuss their options and provide guidance to get them on the right track. There is a range of tools and resources available, such as down payment centers, which helps homebuyers search for down payment and closing cost assistance programs. For those who are having a tough time accumulating a down payment,
there are affordable loan options that offer competitive fixed-rates and low-down payments. Others might have family that can provide help with a down payment. There are also options that enable parents with investments to pledge down payment funds for their child without liquidating their investments (Merrill Lynch).

When guiding first-time buyers in particular, it is important to look even more closely at their journey and how you can customize your support to enhance their experience.

Beyond Generations: Single Women Leading the Way

Beyond generational segments, a group that has been entering into ownership in increasing numbers is single women. The HBIR found single women are prioritizing homeownership more so than their male counterparts (73% vs. 65%).

When thinking about how to support this group, of course tools and resources are vital for all first-time homebuyers, but it’s also important to make them comfortable with what can be a complex process, and maybe even more so when doing it alone. Let your client know that solo homeowners, male and female alike, are increasingly becoming the new norm. Not only do they have you as a partner and trusted guide in the process, but there are also ways to address concerns and demonstrate their buyer eligibility—I’m talking prequalification and preapproval.

When it comes to this topic, a back-to-basics overview can be helpful, especially in a competitive housing market. Check with your clients to make sure they know about ways to set themselves apart from other buyers. While cash, of course, is always king (and queen), there are other ways to separate from the pack if that isn’t an option. Prequalification (an estimate of how much they can borrow) and preapproval (an approved loan amount) not only distinguish you from other buyers as a serious candidate, but they also streamline the process making it easier for all involved.

With new mobile tools you can request prequalification and preapproval all from your mobile device. Remind your client that prequalification is a great first step to set expectations and learn approximately how much one can afford. Preapproval takes it a step further and requires more documentation, but it gives buyers an approved loan amount they can go shopping with.

Refreshing people on the basics can allow them to shop for a home with confidence. The key is not letting unnecessary unknowns stand in their way.

So, when the next client comes your way, I hope you’ll take a moment to consider exactly where they are in their homebuying trajectory and what guidance and resources are best for them.

The ever-changing real estate market has increased buyer anxiety, and consumers are looking now more than ever to gain knowledge from experts to help them accomplish their goals. Make it your mission to help them have their best experience by tailoring your approach to fit their unique journey.



About Author: AJ Barkley

AJ Barkley
AJ Barkley is the Neighborhood Lending Executive for Bank of America, responsible for identifying opportunities to drive successful homeownership among low-to moderate-income borrowers, underserved communities, and multicultural borrowers across the economic spectrum. In her role is, she is accountable for transforming the company’s Community Reinvestment Act commitment for more mortgages, vehicle, and small business lending into a strategy designed to increase demand, market share and consumer education. She is also responsible for aligning strategies to deepen relationships with multicultural, first-time home buyers and low- to moderate-income consumers.

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