There’s a new wave of homebuyers coming, and as REALTORS®, you need to recognize them and learn how to communicate with them because you need them as much as they need you. Based on my professional and personal experience, I believe demographics will drive the next wave of homebuyers, both in Wisconsin and nationally, and that wave will be coming soon.
I’m no real estate expert, but I do know something about demographics and the mood of the public. My company, Kennedy Communications of Madison, is an advertising and media partner with the Wisconsin REALTORS® Association. Together, we’re responsible for the placement of all those television and radio ads you’ve been seeing and hearing over the past year by the National Association of REALTORS® and the WRA. Doing this work has given me a ring-side seat to understanding the market and consumer trends. Based on this, I believe there is a building wave of young buyers about to enter the marketplace, and when they do, they will play a major role in the housing boom to come.
Distinguishing the Millennials
The NAR/WRA ad campaign emphasizes the point that every market is different and buyers and sellers alike should ignore the national news about the slumping housing market, and instead, ask a REALTOR about your particular marketplace and your particular housing needs. That’s good advice since there is no more a “national housing market” than there is a “national weather outlook.” Every area is different.
I’ve passed along that advice to every person I know between the ages of 24 and 29 who has a job. My daughter and three employees have followed my advice in the last year and are absolutely giddy at the quality of the homes they now own. Two other employees are currently searching and will soon close on their new homes.
Why do I single out this group of young people? First of all, they are part of the largest generation in America’s history, and they are now reaching the traditional age for buying their first home. As they enter this market, the prospects of finding a good home at a good price couldn’t be better. Marketers call them the “millennials,” the 16 to 29 year olds in this country who number 85 million and represent 28 percent of America’s population. That means that every year, for a period of 18 years, five million of them leave college, start careers and start families.
It is the biggest generation of kids ever. In Wisconsin alone, that means 80,000 young adults will come of age every year. If they look to buy now, they will find home prices and interest rates at historically affordable rates. That combination of lots of buyers and a low interest rate, as well as healthy inventories for lots of choices, should be blowing the doors off every real estate office in the state.
Unfortunately, this good news is being lost because the news pundits and popular media have been blathering on for the last year about a weak economy, falling home values and so-called “huge spikes” in foreclosures. The fact is eight out of ten Wisconsin families are unaffected by these numbers, with only three percent of Wisconsinites saying their mortgage rates have increased, only 14 percent saying the value of their home has decreased, and just one percent reporting they’ve experienced a foreclosure. Moreover, the limited “bad news” is just so irrelevant to long-term personal net worth and other personal and community benefits of homeownership, that once you crunch the numbers it’s clear every person in the state should be a housing bargain hunter.
Push Financial Benefits
So how do we convince 80,000 millennials to buy a home when the news media is awash in bad news? Two things will sell these young people on buying a home.
First, is income tax deductibility. It can easily be overlooked for first-time homebuyers. Many of these folks have never had the opportunity to itemize deductions and thus do not understand the positive impact mortgage interest deductibility can have on housing affordability. Deductions for mortgage interest and property tax can be as high as two mortgage payments every year.
Many first-time homebuyers look at what they are paying in rent, and if a home payment is higher per month, they assume a home is too expensive. Income tax deductibility has huge advantages. This deduction not only generates economic growth, it drives personal financial planning. We need to make sure every young adult is aware of the deduction and how it will help them, as well as our communities, state and nation.
Second, once we solve the millennials’ misperception of the real cost of owning a home, shopping is the next step in the process. There are now 60,000 homes for sale in Wisconsin and more than 80,000 young people entering the home buying market this year. Many young adults talk about “cute houses” with “great yards” in “good” neighborhoods. Today’s market offers both historically low interest rates and a selection of homes with features for just about any taste. When young adults finally find their dream home, there’s no going back to the thought of apartment living. The emotional attachment they get from walking through a home they love is one of the strongest forces driving homeownership.
New Buyers, New Marketing
So how do you reach them? Your first instinct may be to think web banners and e-mails. While these traditional (interesting to be using the word traditional in referring to the web) approaches are good, there are even better ways to reach this audience. Take the few examples below:
Market to social networks. Consider the power of Facebook, LinkedIn or MySpace. According to a 2008 study by Ofcom, 35 percent of registered social network users are between the ages of 18-34.* Don’t be shy. Create a personal profile. Then blog. Avoid making a huge sales pitch. You want to engage your audience. Keep it conversational. Blog about client success stories, tips and tricks, and ways to educate young homeowners on the real estate market.
Consider cell phone text messaging. This group is regularly sending instant text messages to each other. Ask your clients how they would like to receive correspondence from you. Don’t assume they want text messages unless they agree to it, and if they do agree, do not overuse. People’s cell phones are very personal. Some REALTORS are even promoting text shortcodes on their real estate signs so customers can inquire about specific properties any time of the day or night.
Take to the airwaves. Team up with a local DJ and develop a good radio talk show to explain why younger people should buy a house early.
Understand their culture. Check out some of the Web sites and TV shows that are popular with Gen Y. You must know the perceptions of these young clients: online social hubs like YouTube and MySpace, and real estate shows on cable. They’re huge real estate reality TV show fans.
Relating to this generation is also important. Know the shows they like, such as ‘Buy Me,’ ‘Designed to Sell,’ ‘Flip that House’ and ‘House Hunters.’ They will talk about these shows.
Advertise listings on Craigslist. This online classifieds Web site is hugely popular with all buyers and sellers, but especially with the Web-savvy Gen Y set.
Don’t try to upsell. Be sincere with younger buyers. Don’t promise something you can’t deliver. Do not try to up-sell. Find the home they want within their price range. They will love you.
Know what they like. Younger buyers tend to want a home that’s close to work; near a park (to walk the dog); and within walking distance to shopping, the gym, and local bars and restaurants. Easy home maintenance is also high on their list. So craft a sales approach that’s in sync with this.
Have a great Web site. Ensure that it is friendly and warm, and information packed.
Use a smart phone or PDA, anything that gives an instant response. An e-mail or text is like a ringing phone, be ready to answer it promptly. Your ability to respond immediately is key, but don’t be pushy.