By Bryan Clagett
In 2016 U.S. homeownership rate fell to the lowest point in over 50 years, as rising prices put a home purchase out of reach of many Americans. The Census Bureau reported that the percentage of Americans who own their homes was 62.9% in July 2016, the lowest since 1965.
Last year, the homeownership rate for Americans ages 18-34 fell to 34.1%. This drop in homeownership is due to a delay in home buying by the millennials, who have the lowest ownership rate of their age group in history.
Regardless of age group, home buying is painful.
Aside from the financial considerations and worries, the process of home shopping and home financing is a real challenge, filled with anxious moments and uncertainty. Of course a home purchase is the biggest purchase the majority of Americans make, but it is also typically the most impactful.
Simply put, the decision to purchase a home can have lasting impacts on the household’s finances. Buying a home can’t be viewed just as a single financial milestone, but rather one that can set the stage for financial gain (or demise) for perhaps decades to come. In other words, it’s a very big deal for consumers and banks.
Bankers have to understand the emotional side of home buying, regardless of demographic.
Be it a first time purchase or a vacation property, it’s a stressful time. Consumers have more questions than answers when it comes to buying, financing, and closing on a home—and this is an opportunity for banks to flex their muscle. Offering mortgages and competitive rates is simply not enough, and frankly just feeds commoditization.
Banks need to consider content, search engine optimization, reputation management, and education, if they truly want to remain competitive and relevant in the mortgage business.
While connecting emotionally with home buyers is important, the overall home buying and mortgage experience needs to improve.
Clearly, digitization and modernization of the mortgage process offers many advantages, namely:
- Enhanced experience through design and automation
- A focus on convenience
- Recognition that efficiency leads to lower costs—and savings can be passed on to buyers
- Improved compliance and quality control
- Omni-channel capability
That last point is important. A new survey from the American Bankers Association found that a majority of Americans (60%) agree that while they use online resources for research, they prefer to apply for a mortgage in person.
Digitalization of the mortgage process can be leveraged to improve not only the online experience, but the in-person experience. This is something that the real estate and banking industries must realize. Buying a home is a very personal endeavor.
Becoming overly reliant on technology may alienate some homebuyers who prefer a one-on-one relationship with an experienced loan officer. Consumers today like to have options. The key in today’s home buying and mortgage environment will be a combination of approaches that balance technology and personal connections. The world of process and people must collide, and banks can be well positioned to leverage both. With competition evolving, bankers need to view the mortgage business in a different light, one that is much more in line with the ever changing needs of the American consumer.