The American population is changing. Diversity is increasing across the country, which means a larger percentage of homebuyers are now multicultural, multigenerational and multigender. Given this change in population, it is crucial that lenders have a market strategy to better reach these homebuyers.
The first step to shifting to a more inclusive way of meeting borrower expectations is to understand today’s demographics, then reexamine and build systems to address demographic priorities. “The changes in our population can’t be ignored. Lenders need to understand the opportunities of the marketplace from a business perspective,” says Tony Thompson, founder and CEO of The National Association of Minority Mortgage Brokers of America (NAMMBA). “Most importantly, it is not just what you do, but how you do it. Representing the diverse segments of this new market through employment allows you to reflect into those communities and better serve these populations.”
This “new market” comes with terrific opportunity for lenders to connect and grow. Below are the demographic trends for lenders to embrace and put strategy behind:
1) Growing population of women, millennials & people of color
According to NAMMBA, over the next five years, 75% of all first-time homebuyers will be women, millennials, or people of color. [1]
2) Increased purchase dollars among diverse borrower groups
NAMMBA also reports that the most recent mortgage forecast shows the three largest diverse borrower groups (Asian Americans, African Americans, and Hispanics) generated 24.2% of all purchase dollar opportunities. [1]
3) Transparency is key
Based on findings from ServiceLink’s latest consumer survey, the ServiceLink State of Homebuying Report, homebuyers want more transparency in the homebuying process - be it fees, processes or timelines. Building trust through this information creates a better consumer experience. [2] “The more information a borrower has, the better decision they will make,” says Thompson.
4) Homebuyers want to understand
The ServiceLink State of Homebuying Report also reveals that consumers today are looking to better understand all phases of the home buying process. [2] Connecting with homebuyers early and helping them with their journey not only educates them but makes the process more efficient. Digitization of the homebuying process helps to make this a reality.
5) A shift in who is driving the market
Women, millennials and communities of color are emerging as the significant drivers of this new market. Millennials are the largest generation in U.S. history, and the majority turned 30 in 2020. This, paired with a reexamination of living status following COVID-19, finds millennials looking for homes not necessarily near their workplace. [3]
6) The “Amazon effect”
Consumers today expect a similar customer experience during their homebuying experience as they receive through other buying journeys, like Amazon. Yet another argument for digitization of the homebuying experience. [1]
7) Overcoming cumulative wealth disparity
According to a recent Redfin survey, for a decade, homes sold in mostly Black neighborhoods have been undervalued by an average of $46,000. [4] “Homeownership is the single most powerful strategy for closing the racial wealth gap,” says Thompson. “The Appraisal Institute is an example of an organization working toward fair valuations by increasing representation and improving equitable conditions for homeowners.”
8) The changing face of “home" following the pandemic
The pandemic redefined the value of a home. Home is no longer simply a dwelling or a vehicle for wealth creation. Today, a home can be an office, a classroom, a daycare and even a gym - so larger square footage and outdoor spaces are taking on greater importance to homebuyers. [3]
9) Diversity is increasing with each generation
A Nielsen report revealed that of the 75 million millennials in America, 42% of them are multicultural. The percentage is even higher for Generation Z. [5]
10) Traditional lenders outperforming fintech
According to the J.D. Power 2021 U.S. Consumer Lending Satisfaction Study, COVID-19 severely disrupted the consumer lending space because of stimulus funding, record-high mortgage refinance volume and a volatile economy. [6] Overall, customer satisfaction remained flat for the personal loan industry, with fintech lender scores declining four points, due to slow application approval times and tighter credit criteria. Traditional lenders outperformed fintech’s in
• Putting the customer first
• Providing guidance
• Aligning with customer social views
• Providing honest communication
• Treating people fairly
• Providing more reliable technology
Each of these trends represents an opportunity to innovate with borrower expectations in mind. Staying informed, and educating and engaging with consumers where they are, allows us all to positively drive business and community change.
[1] ServiceLink, 2021, https://event.on24.com/wcc/r/3149974/D195C17B921BDCD8370CB3D0B1A826F0
[2] Link to the ServiceLink Consumer Survey https://go.svclnk.com/state-of-homebuying-report.html
[3] BusinessWire, June 29, 2021, https://www.businesswire.com/news/home/20210629005287/en/Pandemic-Accelerated-%E2%80%98Roaring-20s%E2%80%99-of-Millennial-Homeownership-Demand-According-to-First-American-Homeownership-Progress-Index
[4] Aurellano, Arnie, April 20, 2021, Scotsman Guide, https://www.scotsmanguide.com/browse/content/study-homes-in-black-neighborhoods-undervalued-by-46000
[5] The Nielsen Company, 2015, The Multicultural Edge: The Rising Super Consumers, https://www.nielsen.com/wp-content/uploads/sites/3/2019/04/the-multicultural-edge-rising-super-consumers-march-2015.pdf
[6] Next Mortgage News, May 27, 2021, J.D. Power on Consumer Lending, https://nextmortgagenews.com/news/j-d-power-on-consumer-lending-traditional-lenders-outperform-fintechs/
