Introduction to Today’s Millennial Homebuyers
More than half of homes sold in 2017 will be bought by first-time homebuyers, according to Realtor.com. The largest segment of those first-time buyers are members of the Millennial generation. In fact, at 34 percent, Millennials are the largest group of homebuyers in general. It’s a trend that’s expected to continue for the foreseeable future, which means real estate agents stand to benefit greatly by winning over Millennials homebuyers. And don't forget: AceableAgent offers an entire continuing education course on Millennials in real estate !
Not only are Millennials buying more homes, they’re reshaping the real estate industry altogether. Marketing, communicating and working with Millennials takes a unique approach. It’s something that most agents acknowledge, but many haven’t yet created a strategy for handling. In this installment of AceableAgent Academy, you’ll find the latest trends that are driving Millennial homebuyer behavior and how to adjust your approach to convert them into clients.
- Motivating Factors for Millennial Buyers
- Trends Among Millennial Homebuyers
- Marketing to the Millennial Generation
- Effectively Working and Communicating With Millennials
Motivating Factors for Millennial Buyers
Understanding a buyer’s motivations will go a long way in helping you find the perfect home and providing a stellar experience that they’ll tell their friends about. But what motivates Millennial homebuyers specifically?
The National Association of Realtors’ (NAR) annual Homebuyer and Seller Generational Report provides invaluable insight. Their research delved deep into motivation and here are a few key takeaways about Millennial homebuyers.
Desire to Own a Home is the Biggest Motivating Factor for Millennial Buyers
They’ve been slower to move out on their own, but Millennials are now feeling the urge to leave the nest. Half of all buyers 36 years old and younger cite the desire to own a home of their own as the primary reason for buying. However, Millennials understand that when they buy it probably won’t be a home they stay in forever. On average, they expect to stay in the home they buy for around 10 years.
Investing for the Future
Most Millennials didn’t feel the burn of the downturn after the Great Recession. The vast majority of Millennial homebuyers (85 percent) believe purchasing a home is a good financial investment, compared to just 70 percent of older buyers.
Relocating for an Easy Commute
Finding a place to live with an easy commute is another top motivating factor for Millennial homebuyers. Convenience to a job is the number one characteristic that they look for in a neighborhood. Reducing the drive to work is just as much about convenience and saving money as it is about lowering environmental impact.
Trends Among Millennial Homebuyers
Now that you know what’s motivating Millennial homebuyers, let’s take a look at how their buying behavior is shaping identifiable real estate trends.
Smart Home Features
One of the strongest real estate trends today is the move towards smart homes. It comes as no surprise that the techie Millennial generation puts strong emphasis on smart features that keep a home connected. They’re early adopters who have come to expect online access for just about everything, and they’re home systems are no exception.
If there was ever an eco-friendly generation it’s the Millennials. For younger homebuyers it’s as much as lifestyle choice as a matter of saving money. Of all the energy efficiency features, heating and cooling rank as the most important.
They’re Starting to be More Interested in Single-Family Homes and the ‘Burbs
Now that older Millennials are maturing and starting families, they’re beginning to follow in the footsteps of older generations. Nearly half (49 percent) of homebuyers under the age of 37 now have young children. This change in the family dynamic has Millennials considering housing options that are conducive with raising kids. And the change is happening at a rapid pace. In 2017, only 15 percent of Millennials are expected to buy in urban areas compared to 21 percent in 2015. More and more Millennials are opting to buy in nearby suburbs instead.
Affordable Previously Owned Homes Hold the Most Interest
It should come as no surprise that budget-conscious Millennial buyers are most interested in previously owned homes that offer the most bang for the buck. Overall, young buyers are purchasing slightly older homes than their parents and grandparents. So, don’t think all Millennials are looking for an easy move-in ready home. They’re willing to put in the sweat equity to get a good deal. They’re also more willing than older generations to consider a well-priced foreclosure.
Other noteworthy Millennial homebuyer trends to keep in mind include:
- Desire for a walkable neighborhood is high - even if it’s in the suburbs.
- They tend to prefer to look within a close 10-mile radius of where they currently live.
- Millennials are looking to expand their space with homes that are around 1800 sqft.
- However, of all the home characteristics, Millennials are most likely to compromise on size.
Effectively Working and Communicating With Millennials
The good news is more Millennial homebuyers seek the help a real estate agent than any other age group. A whooping 92 percent decided to enlist the help of a buyer’s agent for their purchase. The real trick is learning to effectively work and communicate with Millennials.
Many Millennials fall into the “digital native” category. They’ve grown up always having the Internet at their disposal, have limited experience with landline phones and are used to having information at their fingertips 24/7. Even older Millennials have a hard time remembering what it was like before desktop computers and cellphones became the norm.
All this has understandably affected the way Millennials learn and communicate. Rather than trying to force them into an older generation’s way of thinking and communicating, adjusting to meet their style is often more effective.
Explaining the Homebuying Process
Millennials understand the upsides of working with a real estate agent, especially when it comes to learning about the homebuying process. Nearly three fourths of Millennial homebuyers believe it to be the biggest benefit of working with an agent. Many buyers under the age of 36 are venturing into homeownership for the first time and need guidance.
One of the best things you can do is focus on putting together information that clearly explains the process step-by-step in a way that resonates with this digital native generation. Handing them a packet of physical papers won’t be as impactful as sending them an email with a PDF.
Recent studies from professors at the University of Wyoming have found that younger generations are progressively becoming visual learners. As simple as it sounds, an infograph is an effective way to impart information. It’s highly visual, succinct and can easily be found online and shared with others. Online videos are also an effective way to educate Millennials on the homebuying process since they largely access the Internet through mobile devices.
Allow for exploration and bypass the lecturing if you want to teach Millennial homebuyers about the homebuying process in a way that will appeal to the age group.
Respect Their Budget
Millennial homebuyers are extremely budget-conscious. They’re also quick to admit that saving for a down payment is the hardest part of the homebuying process. This is partly due to the $25,000 in student loan debt that the average Millennial is working to pay off.
If you want to earn their trust, and you need to, respecting their budget and sacrifice to save is a must. Instead of pushing the budget to the max, you should work with Millennial homebuyers to find affordable options.
- Explain which home renovations are manageable and affordable.
- Discuss the option of buying a foreclosure.
- Do your best to negotiate the closing costs.
- Be honest about which amenities are out of reach.
- Minimize the size of the home as much as possible.
- Educate them on first-time homebuyer programs that can lower the cost of homeownership.
- Consider putting off the home search until fall/winter when the market is more favorable.
Discuss the option of buying a townhome in lieu of a single-family residence.
Prepare Them For Fierce Competition A shortage of inventory (just a 4.3 month-supply nationally in June 2017) and demand for affordable homes means the market will be extremely competitive for most Millennial homebuyers. They need to be prepared for stiff competition in advance if they’re going to get a home that fits their needs and budget.
One of the best things you can do as their agent is put them in contact with a few lenders who can get them pre-approved. They can also benefit from a healthy dose of straight talk about being prepared to see a house as soon as it hits the market and pulling the trigger when they see a home they like. It usually only takes losing a home once for the disappointment to get their rear in gear, but the house that got away could be the best option they find.
If you expect a Millennial homebuyer to pick up the phone when you call you may have to leave a lot of voice messages. Most Millennials came of age in a texting world and that’s their communication preference.
Near Instant Response is Expected
Maybe it’s because of texts and auto-respond emails, but Millennials have come to expect near instant responses when they have an inquiry. Even if you simply let them know you’ll get back to them, that’s better than waiting to respond.
Transparency is Key
As much as Millennials catch flack for the unrealistic “everyone’s a winner” mentality, they crave transparency. It’s partly due to the fact that they can readily research and find out information. If they feel like you aren’t being 100 percent transparent the trust will quickly erode.
Marketing to the Millennial Generation
Marketing to Millennials, whether you’re a buyer or seller agent, requires finesse and an understanding of how to speak to the Millennial generation. Countless studies have been dedicated to figuring out how Millennials are affected by marketing. Technology plays a role, but Millennials also have unique perspectives about marketing that have been largely shaped by being bombarded by advertising their entire lives.
Not surprisingly, if you want to get the attention of Millennial homebuyers you’ve got to be online. That’s where they start their home search and conduct research.
Beyond that obvious point, there are a number of ways to adjust your messaging to appeal to the Millennial generation of homebuyers.
Make Sure Your Pictures Are on Point
If you’re a selling agent that’s trying to attract Millennial homebuyers, it pays to invest in high quality pictures. Because they rely so heavily on Internet searches, Millennials base their opinions on images more often than doing a flyby of the neighborhood and property.
Beef Up Your Social Media Presence
Selling agents that want to market to Millennials have to have a social media presence. As we pointed out in the AceableAgent Academy course Differentiating Yourself From Your Competitors: Social Media , the lion’s share of Millennials spend a significant amount of time using Facebook, Instagram and Twitter. They not only find homes for sale through social media, they use it as a channel for connecting and communicating with agents.
Encourage Word of Mouth
We all know referrals are the holy grail for generating leads in the real estate industry, and Millennials are primed to be your best promoters. NAR’s research has found Millennials are much more likely to find their agent based on referrals from friends than any other generation. They’re also more likely to leave reviews and share their experience through social media. Providing a great experience for one Millennial homebuyer or seller can easily lead to more business in the near future.
Authenticity is Essential
Millennials don’t stomach BS or pushy sales pitches. Marketing has to feel authentic and genuine if it’s going to appeal to people born after 1980. The more something looks like an ad the less likely they are to respond in a positive way.
Sell Your Purpose, Not a Product
Another marketing tactic along the lines of being authentic is selling your purpose, not a product. Explain why you’re passionate about your real estate work. Highlight the experiences of other sellers and buyers that you’ve worked with that drive your purpose home (pun intended). Millennials care less about benefits and features compared to your why for doing what you do.
As you now know, winning over Millennial homebuyers requires a special skillset that can set you apart from other real estate agents. If you shoot them straight, provide valuable insight on the homebuying process and help them find a home that’s a sound financial investment you’ll gain a champion that will provide value well beyond a single sale.