Ready to increase your market share? If so, pay attention to a recently released study from Zillow Group that shows 53 percent of all buyer sales in 2016 have been to first time buyers.
COO Amy Bohuntinsky recently shared the results of a 160-question survey Zillow conducted with 13,000 homebuyers and sellers who closed transactions in 2016. The results demonstrate that the notion the market is too expensive for first-time buyers is simply a myth – and here’s why.
Due to low interest rates, homes are more affordable today than they have been in decades. Zillow’s findings showed that today’s borrowers are spending an average of 15 percent of their income on their mortgage versus the 30 percent that they spent during the 1980s.
To illustrate this point, a $400,000, 30-year, fixed-rate mortgage at the 1986 prevailing rate of 12 percent interest had monthly payments of $4,220. The same loan today at 3.75 percent would have payments of $1,771. The 1986 $4,220 payment would amortize a 30-year, fixed-rate loan of approximately $1.1 million today – almost three times the amount that it would have amortized 30 years ago.
The average buyer in the Zillow study was 36 years old, with half the buyers being Millennials. Another surprising finding was that the percentage of Millennials who want to own a home is very similar to the percentage found among Boomers.
Their motivations for purchasing were also similar. According to the most recent NAR Profile of Home Buyers and Sellers, the primary motivations driving Millennials to purchase include their desire to own a home, a job-related relocation or move, the desire for a larger home or a change in their family situation.
Zillow’s research shows that 32 percent of the buyers found their agent through a personal referral, while 28 percent found their agent online. Regardless of how buyers find their agents, however, they are researching potential agents online. Because of this, Bohuntinsky recommends making online profiles, reviews and testimonials as detailed as possible, because your profile will be among the first places that the buyers search.
Catch The First-Time Buyer Wave
Target marketing first-time buyers today is easier and less expensive than ever before. If you are going to employ traditional print marketing, you can use REI Source (available through most title companies) to obtain list of high probability renters that may soon become homeowners. REI Source charges 5 to 10 cents per name and you can request very specific parameters including age, income, profession, number of children or just about any other requirement that you might like to use.
To illustrate how this works, you could order a list of renters in your geographic location that have recently subscribed to parenting magazines and who earn a specific income. Chances are they will be considering becoming a homeowner very soon.
You can use a similar approach on social media as well, using targeted Facebook ads. Facebook has the data and it’s probably a better ad spend than doing SEO or paying for online ads that people can block with an ad blocker.
Unlike Boomers, who are willing to live within a 20- to 30-mile radius of friends and family, Millennials prefer to be within a 10-mile radius. Almost two-thirds cite being near friends and family as being important in their decision about where to purchase.
Because friends and family are so important to younger first-time buyers, don’t be surprised when their parents, stepparents and two or three carloads of their friends show up to see the property. When this happens, you have another opportunity to receive a personal introduction not only to their first-time buyer friends, but to their Boomer or Gen X parents, who may have a property to sell.
When your buyer introduces you to someone who is viewing the property with them, visit that person’s profile on Facebook, Instagram and/or Snapchat. If your buyer clients are active on any of these sites, offer to take pictures of them and their friends so they can post on their respective sites. Follow up by extending a friend request as well as tagging any photos that you took also.
When the property closes, offer to host a closing party once your buyers have settled in to their new place. This is another opportunity to meet their friends and family. If your buyers are thrilled with their new place, chances are you’ll generate even more business.
If Gary Keller’s prediction that a market slowdown is on the way proves true, keep in mind that the one part of the market that generally continues to be strong in a downturn is the first-time market. In a buyer’s market where your listings aren’t selling, betting on first-time buyers may be one of the smartest moves that you can make.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author. She may be reached at Bernice@RealEstateCoach.com.
