At a Glance
Joe Melendez is founder and CEO of ValueInsured, the only
provider of downpayment protection for modern homebuyers. Reach him at email@example.com.
Modern Homebuyers Have Arrived
Determining how to deliver what today’s borrowers want is vital
By Joe Melendez
Our economy is on an upswing. The U.S unemployment rate declined to a post- recession low this past April, dropping to 4. 4 percent, the lowest mark since
2007. We also are in a four-year run of historically
low mortgage interest rates, even with the Federal
Reserve’s move to push up short-term rates. With these
favorable economic factors in place, why is the homeownership rate at the lowest level in five decades?
One key trend that has kept housing growth from
kicking up to the next gear is the delayed entrance
into the market of millennial first-time homebuyers.
Millennials are in an age group that has traditionally
supplied a steady stream of first-time homebuyers to
the American housing market. Their homeownership
rate, at 34. 7 percent as of year-end 2016, or almost half
of the overall U.S. homeownership rate, is seen as the
biggest culprit for our current overall low homeownership level.
In that light, it is sensible to ask this first question:
Do millennials even want to own homes? Apparently,
yes, they do. According to ValueInsured’s Modern
Homebuyer Survey, more than eight in 10 millennials
( 83 percent) believed owning a home is an important
part of their personal American Dream.
Nerdwallet published an in-depth report last year citing their own research, as well as findings from Zillow
and Fannie Mae, all of which pointed to the same
homeownership desire among millennials. Many
experts conclude that a major factor contributing to
the millennial generation’s low level of homeownership is affordability, coupled with a delay in life-stage
transition — which is at least partially affected by
The millennial challenge
To understand the low millennial homeownership
level, one must first appreciate other records set by
millennials. The average 2016 college graduate owes
an unprecedented $37, 172 in college loans, which
doubles what their predecessors owed just 12 years
ago — before the 2008 housing crisis.
Thirty-five percent of today’s millennial men live
at home with their parents — again, you guessed it,
a record high. Not surprisingly, the economic domino effect helps to contribute to other records. Only
26 percent of millennials are married today, compared
to 48 percent of baby boomers when they were the
same age. The Pew Center predicted that a quarter
of millennials will never be married. Not surprisingly,
millennials also are having children later in life, giving
them another reason to delay becoming homeowners.
Economics, however, do not tell the whole story.
Culturally, today’s modern homebuyers live differently
than the previous generation. Having grown up in a
technology age that drives new consumerism in trial
size and short vignettes, mobility is the new normal
and permanence is becoming rare. Millennials change
jobs on average every 2.8 years. Private car ownership
is not a high priority among many millennials and car
sharing has increased, along with music sharing, con-
tent sharing, nanny sharing, farm sharing and even
Technological-driven mobility aside, millennials also
have grown up in an age that promoted a fear of commitment. They were born to the highest divorce rates
in American history. They also witnessed the most
spectacular housing collapse in modern history.
The 2008 housing crisis delayed a whole generation from buying homes. Even as today’s modern
homebuyers become more fiscally viable, their memories of witnessing parents, neighbors and relatives
lose their homes are still fresh. The well-documented
resistance to commitment among millennials has kept
many potential, qualified modern homebuyers renting
and, in a proverbial vicious cycle, high rents prevent
these future buyers from saving enough to buy their
own homes sooner.
The path ahead
Luckily, with advances in technology comes innovation — envisioned and developed via the professions
that so many millennials are entering. Homebuying,
too, has changed, driven by modern homebuyers’
desire for more self-reliance, self-empowerment,
fairness and ease.
Most of all, modern homebuying has been driven
by demand for flexibility and mobility that has
delayed homebuying itself. To welcome the next
generation into homeownership, homebuying has to
evolve and adapt to how millennials live, instead of
simply waiting for them to “grow up.” After all, many
modern homebuyers share a millennial mindset, even
if they don’t fit into that age group.
Today, the online real estate company Zillow is considered one of the most powerful players in the market.
The online home-search and research site earned this
position by empowering homebuyers and challenging the traditional reliance on real estate brokers and
Companies like Quicken Loans and Rocket Mortgage are among a slate of new online players that are
outpacing traditional big banks in mortgage production. These new, innovative players often adhere to the
cultural markers that have shaped modern homebuyers — an insistence on transparency and a just world,
community sharing of information and resources, and
customization and flexibility to cater to the customer’s unique needs instead of the other way around.
The housing industry needs to make it easier for
modern homebuyers to catch up financially so they
can participate fully in the housing market. Many of
them started late because of the numerous reasons
outlined above. There already has been some movement on that front through the proliferation of new
mortgage programs that help potential homebuyers
get back in the game sooner — such as low downpayment, first-time homebuyer programs and government-aid programs at the national and local levels.
The modern homebuyer no longer automatically
marries at age 25 and buys a home with a white-picket fence to live in for 40 years. What they want
out of the homebuying process, too, must change.
More simply put, to lure back the next generation of
■ ■ Friends buying homes together;
modern homebuyers, they have to be convinced of
the value of homeownership in the context of their
modern values. ■ New initiatives to address the
unique demands of modern
homebuyers must facilitate:
■ ■ Parental lending and gifting of downpayments;
■ ■ Homebuying for multigenerational households;
■ ■ Assistance focused on newly minted Americans
and homebuyers who need language and reloca-
tion assistance; and
■ ■ Risk-transfer programs that facilitate a shorter
duration of homeownership.