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National Mortgage Professional
Oct 29, 2006

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]
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