Tag: home buying

Click here to watch our recent webinar on first-time homebuyers. The younger generations comprise nearly 70% of first-time homebuyers, according to recent Experian Mortgage research. Understanding the generational traits of first-time homebuyers, particularly motivated younger generations, is critical to building highly targeted marketing strategies. Gen Z and Gen Y are essential in the first-time homebuyer market and represent close to 40% of repeat buyers, indicating they consider homeownership important beyond just their first purchase. Generation Y borrowers lead the pack Generation Y borrowers see homeownership as part of the American Dream but have waited longer than previous generations to purchase their first home.1 Additionally, as digital natives, they have grown up in a world with online resources and digital tools, making the home buying process more convenient for them. They can effortlessly research homes, compare mortgage rates, and even complete paperwork without leaving their home – a time and cost-saving advantage. With their desire for stability and their technological proficiency, it comes as no surprise that Gen Y borrowers are at the forefront of the homebuying market, accounting for 52% of all first-time buyers. Keep your eye on the next wave: Generation Z borrowers Although Generation Z is the youngest group with both young adults and those entering adulthood, they should not be overlooked in the real estate market. Despite their age, Gen Z possesses characteristics and tendencies that make them legitimate potential first-time homebuyers. Having grown up in an era characterized by technical advancements and economic instability, Gen Z has observed various challenges, such as the impact of the 2008 financial crisis on their families. They have also witnessed their parents and older siblings navigating student loan debt and a volatile job market. As a result, Gen Z individuals tend to approach life decisions with a cautious mindset. However, it is important to note that Gen Z is a generation known for their ambition and determination. They have an entrepreneurial spirit. A strong desire for stability. According to a recent survey conducted by Chase2, homeownership holds an important place in the dreams of nearly 90% of Generation Z individuals. This unwavering aspiration for owning a home and increasing purchasing power establishes Generation Z as a significant influence in the real estate market. Market to each generation where they are most comfortable, for Y and Z it is online and on the go To get the attention of these younger generations, mortgage lenders must understand that for these groups, digital technology is the norm, integrated into all aspects of their lives. They rely heavily on social media, online reviews, and mobile apps for research and communication. Therefore, it is crucial for lenders to implement a marketing strategy that encompasses social media platforms and personalized email, and, increasingly, text communications, to resonate with the tech savvy nature of these generations. That said, there is nuance in every population, and we see this when observing communication preferences across generations. We know, for example, that first-time homebuyers are considerably more likely than the general public to respond to e-mail offers. Understanding communication preferences for each prospect is important for tailoring your omni-channel marketing approach. Growing up in a world where technology is constantly advancing, Generations Y and Z are accustomed to having immediate access to information and services at their fingertips. As a result, they expect an efficient mortgage lending process that uses online, smartphone-enabled tools and platforms. They count on the ability to complete applications and paperwork online, receive updates and notifications via email or text, and have access to resources and tools to track and manage their mortgage journey. Lenders embracing these realities about Gen Y and Gen Z and connecting with them where they are, will be better positioned to serve this demographic and grow their own business. For more information about the lending possibilities for first-time homebuyers, download our latest white paper. Download white paper 1 “Bank of America’s 2023 Homebuyer Insights Report Explores How Hopeful Buyers are Forging Ahead,” bankofamerica.com.  2 “Millennial and Gen Z Adults Still See American Dream Within Reach Despite Challenges,” chase.com.  

Current economic conditions present genuine challenges for mortgage lenders. In this environment, first-time homebuyers offer exciting, perhaps unexpected, business growth potential. Market uncertainties have kept potential borrowers anxious and on the sidelines. The Federal Reserve's recent announcement that interest rates will remain steady for now has added to borrower anxiety. First-time homebuyers are no exception. They are concerned about the “right” time to jump in, buy a home, and own a mortgage. Despite worries over high interest rates and low inventory, many first-time homebuyers are tired of waiting for rates to drop and inventory to blossom. First-time buyers are eager to explore all avenues necessary to achieve homeownership. They show a willingness to be flexible when it comes to finding a house, considering options like a fixer upper or expanding their search to more affordable locations. The desire to escape the uncertainty and financial burden of renting is a strong driving force for first-time buyers. They see homeownership as a way to establish stability and build equity for their future. Despite the obstacles renters face in the competitive housing market, these potential buyers are motivated. Lenders who take time to understand who these buyers are and what matters to them will be ahead of the game. Notwithstanding stubbornly high interest rates, first-time homebuyers historically have shown remarkable resilience amid market fluctuations. According to a recent deep dive by Experian Mortgage experts into the buying patterns of first-time homebuyers, this group made 35-48% of all new purchases and 8-12% of all refinances between July 2022 and September 2023. First-time buyers represent both immediate potential and long-term client opportunities. How can lenders attract first-time homebuyers and drive growth from this market? The first-time homebuyer market largely consists of individuals in their early 40s and younger, also known as Gen Y and Gen Z. Rising costs of renting a home frustrate these individuals who are trying to save money for a down payment on a house and ultimately, buy their dream home. They want to settle down and look ahead to the future. For mortgage lenders who focus on understanding this younger first-time buyer market and developing targeted business strategies to attract them, great growth potential exists. Often, younger people feel locked out of buying opportunities, which creates uncertainty and apprehension about entering the market. This presents mortgage industry professionals with an incredible opportunity to show their value and grow their client base. To attract this market segment, lenders must adapt. Lenders must develop a comprehensive picture of this younger generation. Who are they? How do they shop? Where do they want to live? What is their financial situation? What are their financial and personal goals?  Acknowledging difficulties in the housing market and showing them a well-conceived path forward to home ownership will win the day for the lender and the buyer. As interest rates are poised to decrease in 2024-2025, there is potential for a surge in demand from first-time homebuyers. Lenders should prepare for these potential buyers, now. It is crucial to reevaluate how to approach first-time buyers to identify new opportunities for expansion. Experian Mortgage examined first-time homebuyer trends to pinpoint prospects with good credit and provide analysis on potential areas of opportunity. For more information about the lending possibilities for first-time homebuyers, download our white paper. Download white paper

Rays of hope are beginning to shine in the economy that suggest the U.S. may have moved beyond the most acute phase of the economic crisis. The housing sector, in particular, looks poised to regain momentum and perhaps lead the path towards stabilization in the second half of 2020. A “V-Shaped” rebound in mortgage applications Despite record levels of unemployment and widespread economic uncertainty, homebuyers have returned to the market with conviction. After shelter-in-place restrictions curtailed open-house visits and crimped buyer demand in early April, applications to purchase a home have risen for six consecutive weeks, according to the Mortgage Bankers Association. The latest data for the week of May 22nd, indicate that purchase applications were 9% higher than during the same period in 2019. If this trend continues, it will show that significant pent-up demand exists in the housing market that may be able to offset some of the lost spring buying season. April new home sales far exceed expectations After declining by 13.7% in March, new home sales rose a modest 0.6% in April. While this was only a slight gain, it was considerably above economists’ projections of a fall of 20% and may mark the turning point in the downtrend. Since the recording of new home sales data occurs when the purchase contract is signed or a deposit is accepted – and is typically for a house that hasn’t been built yet or is currently under construction – it provides a gauge of how buyers feel about their future economic prospects. Building a home also requires hiring new construction workers, buying building supplies, and supporting a host of ancillary industries, thus making it an indicator of further economic activity. Some of the increase in demand for new homes may have been driven by coronavirus quirks. The number of existing homes on the market is at record lows and many people may have been reluctant to put their home up for sale and have buyers tour as health concerns remain. Buyers, as well, may have preferred to steer clear of occupied homes or were unable to make in-person visits due to shelter-in-place restrictions. This lack of options for home buyers, coupled with record-low mortgage rates, likely drove sales of new homes higher. However, for the same reasons why new home sales rose, pending sales for existing homes fell sharply. In April, the National Association of Realtors reported that sales declined by 21.8%, which is the largest drop in ten years. Home prices continue to gain ground Even with shelter-in-place restrictions dampening buyer demand in early April, home values have continued to rise. This is because the supply of homes on the market also contracted, resulting in a simultaneous drop of demand and supply.  According to Zillow Research, the total inventory of homes for sale is down roughly 20% from this time last year. With fewer competing homes on the market, sellers have been reluctant to slash prices and are betting that the lack of options and low mortgage rates will keep buyers on the hook. In April, U.S. home values rose 4.3% from the year before. The states with the strongest growth were Idaho (9.8%), Arizona (8.5%), Maine (7.6%), and Washington (7.4%). It will be interesting to see if this pattern of growth changes as newly implemented work from home policies may shift where people prefer to live and work. Why it matters The housing market has an outsized influence on the overall direction of the U.S. economy. Housing is not only is a big contributor to economic growth, but many owners have a large portion of their wealth tied up in their home. If the housing market can find its footing in the second half of 2020, then it could set the stage for an eventual economic recovery. Learn more

More home buyers and sellers tend to enter the market in the warmer months, making spring and summer a busy season for mortgage brokers and lenders seeking to close deals and work through the mounds of paperwork associated with a home purchase. In April, the number of existing homes sold shot up 4.9 percent year-over-year, to 471,000 purchases across the United States, according to a recent report from the National Association of Realtors®. And sales were up 11.9 percent in April from March. With the belief that mortgage rates will finally start to climb in the coming months, fence-sitters will likely make a move this summer in order to capitalize on attractive rates, creating a healthy home-buying season. On average, it takes 45 days to close a home loan, and anyone going through that process will admit the process can cause stress, anxiety and uncertainty. In fact, a recent study ranked buying a home as the No. 1 most stressful experiences in modern life with 69 percent calling it “stressful.” There are so many tollgates along the journey. Will the consumer qualify for a mortgage? Will the home appraise at the right price? Does the home pass inspection? Are there contingencies that can suddenly halt the sale? Will the seller or buyer get cold feet and send weeks of work down the drain? Of course there are many factors people can’t control as they seek to land their next home, but there are ways both the consumer and lender can work together to smooth out the process and endure the average 45-day closing period. Getting pre-approved for a home loan is obviously the ideal, with consumers understanding their credit score, existing financial obligations and the type of loan they can qualify for, as well as money required at closing. Increasingly, borrowers know the impact credit can have on their home-buying experience. A 2016 Experian study revealed: 93 percent of consumers reported “one’s credit score is important in purchasing a home” 48 percent stated “they are working to improve their credit to qualify for a better home rate” 34 percent of future first-time buyers say “their credit might hurt their ability to purchase a home” In this competitive market, low fees and interest rates drive consumers’ business. However, credit circumstances such as high debt-to-income ratios, too many open trades, or high balances may inhibit lenders or mortgage brokers from offering favorable terms, or even approving a loan altogether. In these scenarios, consumers may qualify for better loan terms simply by paying down debt. Lenders or brokers can assist their customer in rapidly refreshing, re-scoring, or correcting information on their credit report in one to two business days. This step can obviously help consumers, but also benefit lenders by retaining credit applicants before they pursue competitive offerings. Occasionally errors may pop up on a consumer’s credit report – an outdated trade line or inaccuracy – which can also impact the home-buying process. Consumers have the ability to file a dispute with the credit bureaus or their lender directly, and those disputes must be addressed within 30 days. However, if a loan process is already underway, mortgage brokers and lenders can help expedite the process by using a product like Experian’s Express Request™ to facilitate dispute resolution in 48 hours. Quickly addressing an inaccuracy benefits the home buyer, but also the lender who is likely working to close a number of loans during the busy spring and summer months. Without a doubt, the documentation process surrounding a home purchase is intense, but if all parties come to the table quickly with the requested items and verification, the process can be smoother. And then the stress can turn to scheduling moving vans and packing …

April is Financial Literacy Month, a special window of time dedicated to educating Americans about money management. But as stats and studies reveal, it might be wise to spend every month shining some attention on financial education, an area so many struggle to understand. Obviously no one wants to talk money day in and day out. It can be complicated, make us feel bad and serve as a source of stress. But as the saying goes, information is power. Over the years, Experian has worked to understand the country’s state of credit. Which states sport higher scores? Which states struggle? How do people pay down their debts? And what are the triggers for when accounts trail into collections? In the consumer space especially, we’ve surveyed individuals about how they feel about their own credit as it pertains to a number of different variables and life stages. Home Buying: 34% of future home buyers say their credit might hurt their ability to purchase a home 45% of future home buyers delayed a purchase to improve their credit to get better interest rates Holiday Shopping: 10% of consumers and 18% of millennials say holiday shopping has negatively affected their credit score Newlywed Life: 60% believe it is important for their future spouse to have a good credit score 39% say their spouse’s credit score or their credit score has been a source of stress in their marriage 35% of newlyweds believe they are “very knowledgeable” regarding credit scores and reports And let’s not forget Millennials: 71% of millennials believe they are knowledgeable when it comes to credit, yet: millennials overestimate their credit score by 29 points 32% do not know their credit score 61% check their credit report less than every 3 months 57% feel like the odds are stacked against them when it comes to finances and 59% feel like they are “going it alone” when it comes to finances The message is clear. Finances are simply a part of life, but can obviously serve as a source of stress. Establishing and growing credit often starts at a young age, and runs through every major life event. Historically, high school is where the bulk of financial literacy programs have targeted their efforts. But even older adults, who have arguably learned something about personal finances by managing their own, could stand a refresher on topics ranging from refinancing to retirement to reverse mortgages. Over the next month, Experian will touch on several timely financial education topics, including highlighting the top credit questions asked, the future of financial education in the social media space, investing in retirement, ways to teach your kids about money, and how to find a legit credit counselor. But Experian explores financial education topics weekly too, committed to providing consistent resources to both businesses and consumers via weekly tweet chats, blog posts and live discussions on periscope. There is always an opportunity to learn more about finances. Throughout the year, different issues pop up, and milestone moments mean we need to brush up on the latest ways to spend and save. It’s nice so many financial institutions make a special point to highlight financial education in April, but hopefully consumers and lenders alike continue to dedicate time to this important topic every month. Managing money is a lifelong task, so tips and insights are always welcome. Right? Check out the wealth of resources and pass it on. For a complete picture of consumer credit trends from Experian's database of over 230 million consumers, purchase the Experian Market Intelligence Brief.

As the summer home buying season kicks into high gear, a newly released survey shows the importance of understanding credit scores and their impact on homebuyer behavior.