Last week, I spoke at the Colorado Mortgage Lenders Convention in Vail. I know what you are thinking: That Garth is amazing. He's willing to sacrifice the summer sauna conditions of South Florida for the cool clear mountains of Colorado. I am committed to my craft and duty called for me to head West.
Besides, this convention was very interesting because the smart folks who put the show on actually challenged attendees to think about the future of the industry—not just what the impact of the next round of regulations might be, but also about who the future homeowners are going to be, and how we as an industry should serve them. And this next generation—the Millennials—was a big part of the discussion.
So, to prepare for my one-hour talk, I had to do some research on Millennials, even though I had some sense of them since I live with one, or will until she abandons me to head to college. In fact, I am so upset about that prospect that I would like to put a frowny face in this sentence, but the editors at this publication don't support emoticons yet. In any case, I did extensive research on the flight to Colorado and landed in a state of panic.
This group of Gen Yers (which is another term for millennials since Y comes after X) seems like a very hard group to sell to, especially for our industry. My concern quickly dissipated as I stared at the beautiful mountains of Colorado, enjoying the cool air, and even some recreational hiking. Speaking of recreation, I also enjoyed driving by all the marijuana dispensaries that are popping up all over—with clever names like Rocky Mountain High (I wonder if the John Denver estate gets a cut of that) and Cannabis King (which should think about a partnership with Burger King for one-stop shopping—cannabis then a big greasy burger and fries. Wow, dude!).
In any case, despite my relaxing week, I still fear for the future of our industry and especially about how we are going to get Millennials to buy real estate and engage in the mortgage process. So, over the next few weeks, I am going to explore this topic in more detail.
For those of you who haven't cracked open your demographics fact book in a while, Millennials are an extremely fast growing segment of our population. Millennials are the kids who were born after 1980 and came of age about the turn of the century. They're old enough to be buying houses on their own now, but too few of them are doing so. That is why we have a first-time homebuyer ratio that has dropped from the normal 40% level to below 30%. Having a cozy place to live in a parent's basement is part of the problem, but I think it's the smaller part. The bigger problem is that we (real estate and mortgage industry participants) haven't figured out how to sell to these youngsters yet.
In about six years, by 2020, one out of three adult Americans will be a Millennial. By 2025, they will make up about 75% of the workforce. They probably won't be working for the same big companies their parents worked for, however. In fact, about two-thirds of Millennials surveyed agreed with the statement that businesses make too much profit. That's a higher level of agreement than any other generation surveyed.
In surveys, only 19% of Millennials agreed with the statement that most people can be trusted. When members of older generations were hit with the same statement, more than twice as many agreed that it was true. But remember, these are the kids who grew up with a level of violence unknown to previous generations. They saw the Oklahoma City bombing, Columbine and 9/11. Their world was never as safe as the one we older folks grew up in.
And who do these kids think are the least trustworthy? When it comes to the companies Millennials trust the least, a recent Accenture survey found that financial institutions ranked high on the untrustworthy list. And that's a shame because this group has money. Millennials keep more of their assets in cash and less in stocks, making them, as a group, the best savers we've seen in generations. The average Millennial investor has over half of their savings in cash, compared to about 25% for other age groups. A UBS report described them as the most conservative generation since the Great Depression.
Worse, this group is actively moving away from traditional banking. This should come as no surprise, given that nestled in among the 10 least-liked brands for this demographic are four of the nation's most powerful banks. This is also a perception created by experience—after all, Millennials were influenced by the storm of media (traditional and social) about the financial crisis. Many are left with the impression that banks get bailed out, that the mortgage industry crashed the economy, and that the idea of long-term employment is a bygone era.
When it comes to financial advice, this tech-savvy group will go to the Internet, social media, and personal networks for financial advice and not the bank branch or financial advisor.
Now, I know that many in the industry will decry this observation, and flatly state that the Millennials are wrong, that they are naive, and that they just need to grow up. And maybe they will grow up, and their perceptions will change to be more like the Gen Xers we have been financing for the past decade.
While no one is likely to ask you if you are Rocky Mountain High for thinking this, it's still a risky bet. The best companies may be the ones that start to work now on changing their company to better meet the needs of this generation. Over the next few weeks, I invite you to engage in the discussion as we explore ways to reach out and attract the Millennials to the mortgage market.
Garth Graham is a partner with Stratmor Group, and has over 25 years of mortgage experience.