Affordability crisis, social media are redefining today's homebuyer
With housing affordability still a prominent hurdle to homeownership, prospective buyers — especially millennials — now get creative in order to find suitable homes, according to JPMorgan Chase and the Property Brothers.
"When you think about first-time home buying, it used to be not many people wanted to buy a home and take on a project, but we're seeing that appetite shift," Amy Bonitatibus, chief marketing and communications officer for Chase Home Lending, said during the bank's Sweat Equity event on Thursday in New York. "Millennials today account for the largest first-time home buying population and maybe it's just the era of Instagram and all social media causing that DIY inspiration."
It goes beyond simply painting the walls. Because home prices continue to outpace wage growth, an increasing amount of purchasers see properties for what they could be and not just what they are, crafting their dream homes instead of moving straight into them.
"We have a lot of people who watch our shows and they use what they learn to makeover their apartments," Jonathan Scott, of HGTV's Property Brothers, said at the event. "I think it's that little taste of having your own space and something you created that really inspires people to buy their first home."
About 80% of homeowners anticipated starting a home improvement project and 60% completed one in the past six months, according to Chase Home Lending's survey. A 58% majority of respondents set aside up to $10,000 for their renovations, while 21% project spending between $10,000 and $25,000, and the final 21% expect to go over $25,000.
Buyers overleveraging themselves and having to change their lifestyle stand as the biggest fears for millennial purchasers. Both issues point to borrowers needing more education on different loan products and having lender contact for questions, even in the digital age.
"One of the myths I hear is, 'It's not even in the scope of something I can handle. I have to save 25% for a down payment before I can even look at buying a house.' That's just not the case," said Drew Scott. "Another is, 'I want to take on a big renovation, but my credit card limit is not high enough to put the whole renovation on.' That's a terrible idea. There are products designed to get that equity out of your home or top up or a home equity line of credit, but some people think the only way is what they have in front of them."
Having early dialogues about financing options and renovation funding can also be touchpoints for customer retention. Advanced borrowers will want relevant information personalized to them where they express interest.
"For second-time homebuyers, we often do a purchase followed by a cash-out refi very soon thereafter," Bonitatibus said. "We're going to give them all their options. If it doesn't make sense to give them a home equity line of credit, we'll be the first to tell them. Right now, we're saying, 'rates are so low, the HELOC is probably not the best option. Do a cash-out refi. You can lower your rate and you can get the cash out in one transaction.'"