Timothy Smith: 'Echo Boomers' have a different outlook on homeownership
Today's guest-post writer is the keeper of his own blog, the Echo Boom Bomb, which focuses on Echo Boomers -- aka the Millennial generation -- from an economic and financial perspective.
Timothy Smith has worked in the financial-services industry for five years in Texas. He's spent the last two collecting data, anecdotes and details on the generation the Baby Boom produced. (At age 28, he's an Echo Boomer himself.)
He predicts that the Echo Boom won't buy houses in bulk for a while -- if at all. His guest post is aimed at people trying to sell homes in one way or another, but it will probably interest anyone trying to get a handle on what the future holds for the housing market.
Take it away, Timothy:
How would you like to have 80 million customers? If you sell real estate, I know that you would love it. The great news is that the Millennial generation is estimated at 80 million strong, but the bad news is that these Echo Boomers don't appear ready to buy homes and may not want homes.
Echo Boomers, born from 1980 to 1995, constitute the second-largest generation in U.S. history. While they perform well in school, they tend to lack the financial skills needed to make large purchases, such as buying a home. They also think in a different value system than former generations when it comes to financial investments. Those in the real estate profession will face three major challenges with Echo Boomers, but each of these can be addressed with the appropriate strategy.
The first major challenge for those in real estate is the lack of net worth among Echo Boomers.
U.S.-born Echo Boomers have a negative average net worth (with a negative $1,000 median net worth), and 90 percent hold less than $1,500 in net worth. To put that in perspective, that’s a 10 percent down payment on a $15,000 home. Add to those numbers the fact that only 10 percent of Echo Boomers own homes. While the numbers seem to spell disaster, building relationships with Echo Boomers can pay off. They may not be ready to buy a home when they speak with you, but an honest conversation with clear and concise goals will help encourage them to set aside money for a home.
As an example of this, two Echo Boomers I spoke with moved into a house with six roommates because they wanted to save money to buy a home within a year. What made them OK with such a large sacrifice? Their real estate agent suggested some sacrifice so that they could buy a home and the two Echo Boomers followed it. Don't underestimate your power to motivate Echo Boomers; they listen.
Echo Boomers' love of higher education will present another challenge for those selling real estate. Only a third of Echo Boomers express interest in ever buying a home. Another third of Echo Boomers desire a graduate or professional degree because it provides them more flexibility. As many Echo Boomers see it, owning a home can limit your options, whereas a graduate degree can increase your options.
One Echo Boomer stated it best: "If I were to lose my job, owning a home could become a major liability, whereas investing that money in a specialized degree would do the opposite – I could find jobs in other areas within that field." Show these Echo Boomers the small homes that keep their options open, and avoid showing them houses that will drain their time and energy. Most Echo Boomers who pursue higher education want freedom and flexibility.
The final challenge with Echo Boomers is the temptation to oversell. As mentioned, some Echo Boomers will never buy homes – avoid pushing them to buy a home. Echo Boomers are well connected through social networks, and can spread word faster with this new technology. Social networks can work for or against you. If you befriend Echo Boomers and avoid pushing them in directions they don't want, you may receive other clients from referrals. But if you push too hard, they may resent you and tell their friends. The internet offers you the opportunity to build clients while you sleep. Remember that real estate is not the best investment for everyone.
Of course this all assumes you sell real estate. If you consider renting your homes instead of selling them, Echo Boomers will offer you a ton of opportunities. And if you diversify your real estate, selling some and renting some, you may collect the best of both worlds.
Thoughts, questions, arguments? Comment away. Especially interested in hearing from folks in their early 30s and below: What are your thoughts on the own vs. rent debate?
If you'd like to write a guest post -- either to share expertise or to share an interesting housing-related personal experience -- please drop me a line. Details here.