I just read an interesting article in the Scotsman’s Guide Magazine about homeownership increasing for Millennials. Information provided by the National Association of Realtors stated “the share of home purchases by first-time homebuyers rose to 35 percent this year, up from 32 percent in 2015.” The story goes on to state that, “the younger generation dubbed millennials, are getting off the sidelines and buying homes in greater numbers…”. You can view the entire article here.
As I read this article, a few thoughts came to mind. The mortgage industry has been waiting for this generation of buyers to “truly” enter the home buying market. Countless studies, surveys, and stories have been written about the millennial generation impacting the housing markets. Could this be a sign the needle is starting to move? If so, it is very early in the game for this generation of homebuyers.
Being focused on renovation lending for nearly the last 20 years, I know that renovation loans are a great first time homebuyer program. Young buyers can find a home at a reasonable cost, which may have some deficiencies or improvements required. These are the homes that in most areas, not all, are more available and more in line from a cost perspective for first time homebuyers. The issue is, they need work and these buyers are usually cash strapped, just to provide the funds they need for the purchase.
Enter the renovation loan! Renovation loan programs allow the buyer to include in their mortgage the costs to renovate and improve the home. This allows the first-time homebuyer to make improvements or repairs to key systems and move into a home with a relative sense of security that they won’t have a major system breakdown in the first few years of homeownership, which could have disastrous consequences for the homeowner. Any concerns can be addressed in the renovation project of the loan.
The home must be priced right in its current condition and the repairs must improve the value enough so the completed value of the home will support the improvements which need to be completed. There are generally a fair number of homes available in most areas that will fit these needs and become prime candidates for this opportunity. In future posts, I’ll go into some of the techniques which real estate and mortgage professionals can employ to market to these buying opportunities.
As I read the article, I started recalling other stories and surveys I have read in the last 24 months or so, which also stated “how” millennials prefer to conduct transactions in their lives. This group is extremely tech and social media savvy and do much of their business on their electronic devices. This led me to the emerging opportunity I have been writing and speaking about for 6 months or so. Using technology in renovation lending to help close more real estate transactions.
If millennials are now starting to truly enter the housing market as an economic group and many as first time homebuyers, it seems to be a perfect storm for renovation lending. If that is the case, then real estate professionals implementing the VR technology discussed on this site and combining that with renovation lending programs available, would catapult the opportunity for home sales to this market.
Using VR technology to show a buyer the potential look of the renovated home will fall into the wheelhouse for this population entering the homebuying market. VR technology is already being implemented by real estate professionals ahead of the curve to present full home tours to potential buyers and make the house selection process more efficient and profitable. Utilizing the same technology for renovation lending and showing home improvements which can be done to a home with deficiencies or in need of improvements is the next step in the process and one that is already beginning. Market a home with a renovation plan and show the buyer what the home can look like under that plan. This marketing and sales strategy will move those homes in any area which are harder to sell and create a vision and market for the first-time homebuyer.
Feel free to contact me at Insights@RenovationRealm.com for any questions or discussion you would like to have on these topics. See you next time in the Renovation Realm!