Wells Fargo study finds new kind of homebuyer on the way: Millennials
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 (WFC: 32.0017 +1.46%), 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."