Wells Fargo study finds new kind of homebuyer on the way: Millennials

Wells Fargo study finds new kind of homebuyer on the way: Millennials

Friday, March 25th, 2011, 10:47 am

The still struggling housing industry might actually be scraping the surface of the largest home-buying opportunity in generations: the Millennials.

According to a study from Wells Fargo (: ), there are 51.5 million potential first-time homebuyers born between 1979 and 1991. Roughly 6 million more of these Millennials are reaching the prime homebuying age than baby boomers did in 1977.

Often characterized as hoodie-wearing college kids strapped to iPods and iPhones, this generation is the most diverse, more technology driven and actually more inclined to trust institutions than their predecessors, the Gen Xers and baby boomers, according to a Pew Research Center study.

In fact, when Wells surveyed more than 3,000 Americans, it found attitudes toward homeownership are still optimistic, especially in this younger crowd.

For the last three years, the mortgage industry has been mired in problems throughout the process. Poorly written loans taken out by homebuyers who could not afford them on the origination side drove foreclosure levels to new heights, overwhelming servicers, who quickly found themselves embroiled in investigations and new stricter regulations.

The result has been a growing shadow inventory of foreclosed homes needing to be sold, reaching as high as a 10-year supply in New York, according to Standard & Poor's. Meanwhile, home sales plummeted as recently as February to its lowest rate since the Commerce Department began measuring the statistic.

Between 1980 and 2000, membership at the National Association of Realtors hovered around 750,000. But by 2006, that number grew to 1.36 million. Since the collapse, membership fell to about 1 million, according to NAR.

Of the Realtors still in the business, 40% reported gross income of less than $25,000 in 2010.

The upcoming qualified residential mortgage could dry up home sales even more. The QRM rule could force lenders to retain 5% of the risk after securitization on any loan written without 20% down. What the rule will definitively say is still speculation at this point. In a letter written to regulators, NAR and the National Association of Homebuilders said it would take a family earning a median income 14 years to save the 20% necessary for the down payment on a new home.

Despite all these setbacks, homeownership is still a destination. More than 70% of those surveyed by Wells Fargo still want to own a home. Millennials even responded to more rigorous credit requirements favorably, describing them as beneficial to their goal of remaining in the home once they make the purchase.

Roughly 26,000 real estate agents attended a Wells Fargo presentation Thursday shown in 100 theaters nationwide. Brad Blackwell, executive vice president at Wells Fargo told the audience this wave of Millennials will be the new lifeblood for the industry.

"We're going to have to figure out how to reach them," Blackwell said.

Lisa Zakrajsek, another EVP at Wells and the leader on the study, told HousingWire after the presentation the bank will begin putting together homebuying workshops aimed at the younger crowd this year. The banking giant also plans to make changes to its website for this more tech-savvy generation.

"We've invested hugely in this infrastructure," Zakrajsek said. "We're making great enhancements to meet the needs of younger buyers."

Write to Jon Prior.

Follow him on Twitter @JonAPrior.

3.21.11 McDonalds Update.m2ts

How to Buy a House - Closing the Deal

Take a deep breath. All the work you (and your agent) have done over the past weeks is about to result in the keys to your home.

The sales contract prepared by you and your agent has been signed, initialed and dated. Your formal loan application has been approved. The performance dates in the contract have been met. Home inspection and any other inspections that you feel were necessary, have been done. A time for closing and the place of closing has been scheduled.

Just before closing, the final walk through of the house will take place. If there were repairs noted in the contract as needing to be done, now is the time to see if they have been accomplished.  If they haven't, the seller (having agreed to the repairs, of course) must get this done.

So, now we are at the closing table. Once all the necessary documents have been signed by all parties involved, and you have handed over your check, you will be the owner of your new home. A word of caution. Until the deed is recorded for your new home, it is not actually yours. Normally, this is done the same day as closing, so the earlier you can schedule that time, the better.

Congratulations, homeowner!

How to Buy a House, Part Six

Remember that list of needs and wants that you compiled? It's time for you and your real estate professional to begin narrowing down the choices. You've found just the right neighborhood and there are several houses in which you are interested. Believe me, unless you are keeping track, you'll forget that the house on Smith Drive had that wonderful kitchen but you weren't so keen on the backyard. Your agent will provide you with a flier that normally has a photo of the house on it, along with the address of the home, the city it is in, the subdivision (if applicable) and other pertinent info about the house itself. Use the reverse to make notes as you move through the house. Take a few photos and when you get home, print them out and attach them to the flier.

Once you've found a house that you'd like to make an offer on, you and your agent will sit down with a comparative market analysis. This will tell you what houses similar to the one you are offering upon have sold for within the past six months. You'll be able to base your offer (what you are willing to pay for the house) on this information. Your real estate agent will go over the Offer to Purchase with you and together you will address each one of the items. Once the offer is initialed, signed and dated, then your agent will to present the offer to the seller's agent.

It will then be up to the seller to accept it (congratulations!), reject it, or make an counter offer. A rejection simply means that your first offer was unacceptable to the seller, so you'll have to begin again. A counter offer means that while the amount of your initial offer was not enough in the mind of the seller, the seller has provided you with a number that would be. This is just a starting point for both of you in the negotiations. Often, there are multiple offers on a house and you must be careful not to become swept up into a competition. Sure, you might get the house but pay more than you should. Remember your plan. You have a set amount that you are willing to spend. You know what comparable homes have sold for in the area in which you are interested. You are fully and completely prepared. You have a professional on your side. While your agent will guide you through the negotiation process, you must be prepared to walk away if the price of the home cannot be negotiated to a price comfortable for you.

Tomorrow. We close the deal.

How to Buy a House, Part Five

Now that you have selected your real estate professional, given him or her your lists (both need and want), you are ready to begin the search in earnest.

Location, location, location. Old and established or up and coming neighborhood? The former will be more expensive, maybe even out of your price range but how do you find an up and coming neighborhood? Just outside the boundaries of that well established neighborhood is the place to begin looking. How about a new home community? A brand new neighborhood, sometimes with amenities such as a clubhouse and swimming pool.

What is a good neighborhood? It is close to shopping, transportation, has parks and community centers, has well kept homes and a high percentage of owner-occupants and a low crime rate. Call the local police for the crime statistics. Call the city or county offices for information about the schools. Take a drive through the area you are interested in and see what life is like. Visit the parks and rec centers and talk to the people who live, work and play in the area. What do they think?

Your real estate professional can help you find out what the resale values are in the neighborhood. Ask your real estate professional how long houses in your desired area have been on the market. Are sales slow? Is that due to the economy or has the neighborhood experienced problems?

Have you found the perfect neighborhood? Not so fast. Drive to and from the neighborhood at different times of the day and from different directions. Talk to the people at city hall or the county seat and make sure there are no major construction projects planned for the area. Take an active, not passive interest in this purchase. You and your real estate professional are a team. Talk to them about any concerns you may have about a neighborhood in which you are interested. Their knowledge of the local market will be invaluable to you.

Tomorrow, THE HOUSE!