The future of demand: Trendsetters to watch (Part I) ... Generational selling: Baby boomers, Gen Xers and echo boomersJoe AmorosoBaby Boomers, Generation X, National Association of Realtors , echo boomers, marketing
Despite the serious issues of rates, margins and volumes, one of
the most basic questions you should be asking is, Whos buying
houses now? Even more importantly, you should be asking, Who will
be driving the residential real estate marketand my
businesstomorrow? This article is the first in a three-part series
in which Ill examine three key emerging markets baby/echo boomers,
single women and the Hispanic sectorand outline what every broker
needs to know about these influential and diverse demographic
groups.
In the coming years, the mortgage needs of these trendsetters
will dictate and define our business. By educating yourself and
training your organization about the specific desires and concerns
of these three critical groups, youll be better poised to
successfully sell to these customers.
Baby boomers
The traditional economic powerhouse behind U.S. housing industry
trends has long been the generation born between 1946 and 1964,
otherwise known as baby boomers. Around 78 million baby boomers are
currently enjoying their prime earning years and have built
substantial home equity. Some economists predict that as many baby
boomers turn 60, many of them will move their investments from the
stock market into real estate.
Thats good news for brokers, since baby boomers are responsible
for propelling record second-home/vacation-home sales last year,
and that should continue.
Second or vacation homes
According to the National Association of
Realtors (NAR), in 1980, only about 150,000 U.S. families owned
second homes. Now, second home purchases account for more than
one-third of all homes purchased. Between vacation and investment
property, baby boomers bought about 40 percent of the combined
total of all second-home sales, or approximately 3.34 million
properties.
Almost 60 percent of younger boomers, ages 41 to 49, and 50
percent of older boomers, ages 50-59, plan to purchase new homes
for their retirement. Nearly half of them say that they dont want
to move more than three hours away from their families during
retirement. In order to capitalize on this growing trend, ensure
that you offer the kinds of products that appeal to baby boomers
searching for a second home or looking to invest in property they
can pass on to their kidsloans like 60 percent loan to value with
no add-ons and full documentation, priced the same as
no-income/no-asset loans. Additionally, many baby boomers will be
helping their children buy their first homes, so focus on the kinds
of loan products that dont have gift restrictions.
Marketing savvy Baby boomers grew up in the
turbulent, idealistic 60s, and this generation is characterized by
values. They are far more active, health conscious and engaged than
their predecessors and are redefining retirement and what it means
to be older than 50 or 60. Take a cue from organizations like
Chicos, Ameriprise Financial and New Balance, who are successfully
marketing to boomers and whose campaigns strike a deep and direct
chord with these former Age of Aquarius buyers. Remember that baby
boomers are sophisticated shoppers who have historically been brand
loyal.
To effectively reach this group, your marketing and customer
service should demonstrate both respect and good manners. Boomers
respond to soft selling techniques that emphasize them and their
needs and make them feel like winners. Forego gimmicks and provide
solid, concrete information about your products and services. If
baby boomers have a positive loan experience, theyll probably tell
their peers and generate additional referrals. Since demand for
loans from this group will likely continue to be strong for the
next 25 years, take the time to earn their trust.
Over the next decade, baby boomers stand to inherit even more
moneyaround $41 trillion. Since many of them can easily pay off
their mortgages, concentrate your messaging efforts on why its
still a good idea to have one. Emphasize the associated tax savings
and underscore that theyll remain diversified in their assets.
Gen Xers and echo boomers
Hot on the heels of their parents are Gen Xers (born between 1961
and 1981) and echo boomers (born between 1982 and 1995). Echo
boomers (also referred to as Millennials or Generation Y) already
comprise nearly a third of the countrys populationroughly 72 to 80
million.
According to the National
Association of Home Builders, Gen Xers and echo boomers are
buying more than half of all new homes. In 2003, Gen Xers accounted
for 49 percent of all new construction purchases for the year,
while younger echo boomers accounted for six percent of new
construction purchases.
Looking ahead, 37 percent of Gen Xers and 27 percent of echo
boomers plan on buying homes, which will be bigger and better than
the ones they own right now, in the next two years. Unlike their
parents, these two consumer groups have a multitude of affordable
mortgage options to choose from, as well as historically low rates.
Echo boomers are part of an era of unrivaled financial wealth, and
older echo boomers are applying for loans at a relatively young
age. With parental help with down payments and closing costs, this
group has few barriers to securing mortgages, and many43
percentwill purchase a home with no money down.
With four million echo boomers set to enter the workforce each
year between now and 2016, they represent your future-generation
customers. Unlike baby boomers, Gen Xers are more entrepreneurial,
independent and street smart, while echo boomers tend to be more
optimistic, focused and characterized by fast-paced schedules and a
team attitude. Effective marketing to both of these groups requires
techno-savvy techniques and vehicles, as they are highly aware of
their mortgage options and likely to shop for rates and homes
online. According to the 2005 NAR Profile of Home Buyers and
Sellers, 42 percent of buyers who used the Internet to search for a
house were 34 or younger. Make the mortgage process as simple,
efficient and streamlined as possible, and youll hook these buyers
who expect instant gratification and results.
In summary
Selling to each of these distinct generations requires that you
focus your services and products to meet the unique needs of each
group. Take time to review your marketing, servicing and
communications strategies to ensure that the tone and values you
convey reflect the core dynamics of each generation. Whether your
customer is entering the prime of his life or just getting started
out of college, delivering the right message in an effective format
will likely enhance your business.
Joe Amoroso is senior vice president of Opteum Financial
Services. He may be reached by e-mail at
[email protected].
