Millennials, who were the dominant force in the housing market a year ago, have taken a step back. It's been a significant drop.
Now, why are millennials pulling away from the real estate scene?
The primary reason is interest rates.
The real question is, who has taken their place as the leading group of homebuyers? Who's currently driving the market?
Well, it might surprise you, but it's the baby boomer generation, and they're making a strong comeback in the housing market. In fact, cash buyers account for 27% of the recent transactions, and many of them are likely baby boomers with disposable income, not overly concerned about interest rates.
They see opportunities in the market now that they didn't have a year ago when they were competing with numerous other buyers.
So, as you adapt your marketing strategies to changing market dynamics, consider focusing on baby boomers within your sphere...
I want to highlight three key stats that drive our real estate business:
First, about 80% of our business consistently comes from our sphere of influence, no matter what we do.
Second, an impressive 53% of today's industry transactions are from millennials.
Lastly, a Nielsen report reveals that a significant 92% of consumers trust family and friends over advertising. This underscores the importance of reviews and recommendations.
Now, let's dive into these areas and ask ourselves what we've done in the last six months to strengthen our sphere of influence, boost sales, and expand our reach.
Consider this: In a changing market landscape, where factors like interest rates and conditions influence sales ratios, it's crucial to grow our audience.
If your sphere of influence isn't growing, you might already be experiencing a decline in business due to lack of proactivity.
But it's not just about quantity; quality...
As a real estate professional, I often get asked about the biggest demographic group that's currently buying homes.
Well, the answer might surprise you:
In fact, they make up the vast majority of buyers on the market. So, if I want to get these potential buyers off the fence and into homeownership, I need to focus on their motivations, not just on getting more business.
Here are the top three reasons why millennials are buying homes.
1. Millennials want to build equity in their own home instead of building someone else's equity through rent payments.
This is a powerful message that needs to be a part of our marketing campaigns. Have you ever stopped to think that every time you make a rent payment, you're helping someone else build their wealth? What if you could start building wealth for yourself and your family by owning your own home? Homeownership is within everyone's capability, and I can help...
How old were you when you moved out of your parents' house? And how old were you when you purchased your first home? New information from the National Association of REALTORS shares the latest data with us on the averages in the US. The average age of someone leaving their parents' house today is... drum roll... 26 years old. And the average age for them to purchase their first home is 34.
So I'm gonna challenge you. Put this out on a social media post and ask that question:
When's the first time you moved outta your parents' house? When did you buy your first house? You're gonna get a ton of responses. Then answer the question yourself like I did recently, and I got a huge response on this, and my answer was, I moved out at 17. I bought my first house at 19.
Then you might dig deeper and say, what's preventing you from taking that next step? If you have some people say, well, I'm not a homeowner yet. Get into that...
People that are doom and gloomers that think the sky's following, everything's going wrong, the market's never gonna come back are dead wrong. For one specific reason. And I'm gonna tell you why:
First of all, interest rates are coming down, demand's coming back. There are all kinds of leading indicators that say our spring and summer markets are gonna be incredible. But let me give you just a piece of information, which was shared with me recently, which I thought was absolutely fantastic and got me excited about the upcoming surge of activity we're gonna see in the next 5-10 years. We're gonna have this incredible run that's gonna be starting very soon. And I want you to be a part of it.
It's all about generational population basics. When we look at the baby boomer generation, which when I started in real estate, everything was about the baby boomers because they were just calming through the pipeline, buying up...
A recent study by Bloomberg shows that by 2040 electric vehicles will make up the majority of new car sales worldwide, and account for 33% of all the light duty vehicles on the road.
Because of that, electric charging stations at homes are gonna become more and more and more valuable.
So think about this when you're working with a builder or somebody that's doing a remodel or flip on a home. Would it be important, would it be something valuable to add that charting a station to the property as a way to create more value in that property to a pretty large segment—and growing—segment of home buyers?
By the way, an upgrade in capacity for electrical load, according to Seth Cutler, is that it's gonna cost between about $1,500 and $7,500 to upgrade your electrical system to handle that capacity.
But what can you get back when you sell the property? Well, we don't know that hasn't been studied. But we do know that it's among...
The Fed just raised interest rates, no secret there. It went up by a quarter percent. And it's likely that we're gonna see interest rates go much higher than they are today.
And so there's concern in the marketplace, like what are these interest rates gonna mean for the real estate market? There's a lot of differences between where we're at today in the market and where we've been in the past. For instance, right now we have the lowest supply of homes ever recorded. So that's gonna indicate that demand is probably gonna stay pretty strong and healthy because we need more supply to fill the demand.
But there could be a situation where you get to what's called buyer resistance. And that's where buyers say, "I can't afford to pay anymore for a mortgage payment."
We're not there yet. We still have high demand. And just by comparison, yes, rates are higher than they were a year ago certainly. But if we go back decade by decade,...
There's one thing we've all done as human beings, living in the United States of America. I guarantee every adult has thought about this at some point:
They've thought owning a rental would be super cool.
Even if they're not homeowners yet, they've thought it would be nice to be on the other side of the equation — and not be paying rent, but also receiving rent.
So this makes for a great conversation. And there's something interesting that's happening in the world today, which we don't talk enough about in the real estate world, which is this:
A lot of millennials and the next generation of buyers coming in are being taught and embracing this concept that they don't want to own their own home.
They wanna continue renting their own home because they want a mobile lifestyle. And they wanna be able to move from New York to Miami to LA. They wanna surf around and have that mobile lifestyle, but they wanna own a couple rentals.
There's a new stat from the National Association of REALTORS, which states that 53% of our buyers and sellers now fall into a specific demographic group.
You can probably guess what that is...
It's the millennial generation.
Millennials aren't kids anymore. They're actually in their mid twenties or early thirties. They are definitely the driving force in the market. And they're far, far bigger than the baby boomer generation ever was.
So when we look at just statistically, the numbers of this, we have to embrace millennial marketing. It's super important.
And there's some things that we can do to do a much better job with them.
1. Social media
You know I was going to say that. That's where they're at. We've got to go where the audience is. That means we're doing 5 to 15 posts a week on different platforms that we know they use.
So some of you might be doing Facebook, Instagram, TikTok, YouTube, you name it. You just got to figure out...
The Wall Street Journal just put out an interesting article about a company called Invesco putting $5 billion into a hedge fund that's purchasing single family homes.
And they're not alone. There's another $6.5 billion dollars targeted with other hedge funds doing exactly the same thing.
Now, why are these hedge funds going after single family homes?
Well, they've identified that they can get a cap rate of as much as 6.8%. That's the target rate that they're comparing to apartment buildings and commercial — which is like the low sixes.
So what they're saying is: we're going to make money on this. And we're going to rent these houses to millennials that are choosing not to become homeowners.
What we need to do as an industry, number one is to recognize that we should be investing in single family homes as well. But also we need to encourage everybody that's not a homeowner today to get into the real estate arena and buy their...